ACCC to audit franchisors in take-away food and fitness industries

Tuesday 29 October 2013 @ 9.46 a.m. | Trade & Commerce

The Australian Competition and Consumer Commission (ACCC) is set to use its audit power to check whether franchisors in the take-away food and fitness industries are complying with the Franchising Code of Conduct.

The industry code audit power enables the ACCC to compel a trader to provide information or documents which it is required to keep, generate or publish under a prescribed code. For franchisors, this includes disclosure documents, marketing fund statements and franchise agreements.

Addressing the Legal Symposium at the National Franchise Convention, ACCC Deputy Chairman Dr Michael Schaper said the audit power will be used to target industries which are generating a disproportionate number of complaints:

“In the ACCC’s next round of audits we will be looking at franchisors from the take-away food and health and fitness industries, however our audits will not be restricted to these two sectors.”

Since the audit power was introduced in 2011, the ACCC has audited around 50 franchisors. Most franchisors have been compliant with the requirements under the Code.

Dr Schaper also discussed the ACCC’s wider compliance and enforcement activities in the franchising sector:

“The ACCC has actively enforced the Franchising Code since its introduction in 1998. During this time we have taken successful court action against more than 20 franchisors and have also obtained court enforceable undertakings from more than 10 franchisors. These cases cover unconscionable conduct, misleading and deceptive conduct and contraventions of the Franchising Code.”

Dr Schaper also flagged that the ACCC will soon be calling for expressions of interest for membership of its Franchising Consultative Committee.

About the Franchising Code of Conduct

The Franchising Code of Conduct, which is part of the Trade Practices (Industry Codes—Franchising) Regulations 1998 (SR 1998, No 162) has the force of law and requires franchisors to disclose specific information about a franchise to both potential and existing franchisees.

It regulates the dealings between both parties in a franchise relationship and provides for dispute resolution mechanisms.

The Franchising Code requires franchisors to provide prospective franchisees with the following documents at least 14 days before they sign an agreement or hand over non-refundable money:

  •  a disclosure document (setting out key information about the franchise that the prospective franchisee may not otherwise be able to obtain);
  •  a copy of the franchise agreement in its final form; and
  •  a copy of the Franchising Code.

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