The business relationship between franchisees and franchisors is to be investigated by a federal parliamentary committee, which has been welcomed by 7-Eleven.
A notice of motion successfully moved by Nationals Senator for NSW John Williams has authorised the Parliamentary Joint Committee on Corporations and Financial Services to examine all aspects of agreements between franchisees and franchisors, including whether the Franchising Code of Conduct is effective.
Senator Williams has met with some franchisees and describes their complaints about treatment by their parent company as horror stories.
He says examples include misleading financial figures provided before agreements have been signed, franchisees forced to buy products from suppliers authorised by the parent company when these could be acquired cheaper elsewhere, and a lack of transparency over lease agreements and dispute resolution.
Senator Williams says that while there are many thousands of success stories in the franchise sector, he has met people who have invested their life savings only to walk away with nothing when the business has failed through reasons outside their control.
“This inquiry will look at what works well and what doesn’t under the Franchising Code of Conduct,” he said, “and a focus will be on how transparent these agreements are.”
7-Eleven welcomes inquiry
7-Eleven says it believes the inquiry’s terms of reference proposed by Senator Williams are wide enough to encourage a balanced debate, including the focus on termination provisions, and harmonisation, of the Franchising Code of Conduct and the Oil Code of Conduct.
“We look forward to sharing our experience with the joint parliamentary committee and the lessons we’ve learned along the way,” 7-Eleven CEO Angus McKay said.
Under the existing industry codes, wage underpayment does not automatically entitle a franchisor to terminate a franchise agreement. Termination for underpayment is only available to a franchisor if it can be demonstrated at the requisite level of proof that the underpayment has occurred in a way that involves fraudulent conduct.
7-Eleven claims the barriers to terminating a franchise agreement in cases of underpayment are difficult enough for a company the size of 7-Eleven to pursue through the courts, let alone the two-thirds of Australian franchisors that are small-to-medium businesses.
Accordingly, 7-Eleven says it continues to call for the two relevant industry codes to be amended to give franchisors the right to terminate a franchise agreement in the case of serious non-compliance with Commonwealth workplace laws or Fair Work instruments, such as deliberate wage underpayment.
“We share the concerns at recent developments within the broader franchising sector and look forward to contributing to the work of the joint parliamentary committee in developing recommendations to raise the standard across the sector and ensure a transparent, balanced and hopefully prosperous partnership between franchisor and franchisee,” Mr McKay said.
