A recent report, published by the Australian Competition and Consumer Commission (ACCC) shows franchisors have been holding back critical information.
The report, entitled Disclosures practices in food franchising, reviewed sample disclosure documents from 12 franchisors and showed that many of the documents were ‘problematic’.
“Our compliance review identified that some franchisors are making it difficult to contact former franchisees by failing to disclose basic information such as email addresses or mobile phone numbers,” ACCC Deputy Chair Mick Keogh said.
The franchising industry has, in general, been fraught with issues that led to the ACCC highlighting the space in its enforcement priorities for 2019.
In their report, the ACCC writes:
Ensuring that small businesses receive the protections under the CCA, with a focus on the Franchising Code of Conduct and unfair contract terms.
Franchisors were a feature of the Code of Conduct for 2018, as highlighted by Chair Rod Simms in a speech delivered in February of that year when he noted the decision to focus on food franchisors had to do with the volume of reports the ACCC was receiving about them.
In February of this year, Keogh said, “The ACCC receives more franchising code-related reports from café, restaurant and take-away food franchisees than from any other sector, and for this reason, franchisors operating in this sector will be the target of our next round of checks.”
He continued that more than half of prospective franchisees don’t get advice, and that some franchisors have been making it difficult for them to contact former franchisees. That contact, he noted, was critical for a prospective franchisee to get a realistic picture of the business.
The report identified that eight out of ten franchisors make it difficult for franchisees to contact former franchisees.
Seven out of 12 franchisors failed to disclose what essential supplies were subject to supply restrictions.