VACC, the peak Automotive Industry body in Victoria, is recommending changes to the Franchising Code of Conduct.
The Government has invited written comment on possible amendments after the Federal Parliament Joint Committee on Corporations and Financial Services announced an inquiry into the Franchising Code of Conduct last year.
“There are over 70,000* businesses operating under a franchise agreement in Australia - many of which are associated with the automotive after-market. Many of VACC’s 5,500 members are Licensed Motor Car Traders (LMCTs), motorcycle, truck, tractor, outdoor power equipment, car servicing, fuel or motor-accessory retailers who operate under a franchise,” VACC Executive Director, David Purchase, said.
“We have found that in the majority of cases, the franchise agreement is weighed in favour of the franchisor. The agreements can be controlling and often leave the franchisee in a precarious position.
“VACC is seeking a more balanced relationship between franchisor and franchisee. In particular, we recommend that the Code of Conduct contains an explicit obligation for business relationships to be undertaken in ‘good faith’,” Mr Purchase said.
VACC has submitted the following recommendations to the Government in relation to the Franchising Code of Conduct:
• Introduce a ‘good faith’ clause to minimise behaviour that can potentially lead to disputes. ‘Good faith’ will encourage an overarching obligation for franchisors and franchisees to behave more fairly during all stages of a commercial franchise relationship including dealing with termination, renewal and the variation of Prime Marketing Areas;
• Mandating additional, specific disclosures in regard to business costs in franchise agreements;
• The disclosure of either renewal or non-renewal contractual franchise arrangements, within an acceptable time frame, in order for franchisors and franchisees to move toward a future with minimal disruption to their commercial relationships and business operations.
“Conflicts arise when definitions in an agreement are unclear. A clear Franchising Code of Conduct will enable franchisors, franchisees and potential franchisees to establish a framework which encourages good business practice for the benefit of all parties, which in turn will benefit the Australian economy,” Mr Purchase said.
*Franchising Australia 2008 survey. Griffiths University, Asia Pacific Centre for Franchising Excellence & Franchise Council of Australia.