Following on from the Issues Paper issued by the Franchising Taskforce in August, the Franchising Taskforce released a Regulation Impact Statement (RIS) on 11 November, which will assist the Franchising Taskforce in making recommendations to Government regarding reforms to the franchising sector. The Taskforce and is inviting submissions by 6 December 2019.
The Franchising Taskforce was established by the Government in April 2019, following on from the publishing of the Fairness in Franchising Report (Report) by the Parliamentary Joint Committee on Corporations and Financial Services (Committee). The Committee made 71 recommendations, many of which required the Franchising Taskforce to examine their feasibility.
The RIS identifies seven key principles under which the Franchising Taskforce is canvassing options for reform, namely:
Entering into a Franchise Agreement
Operating a Franchise
Exiting Franchise Agreements
For each of the principles that have been identified, the Franchising Taskforce has highlighted for stakeholder consideration underlying policy problems and options to address each issue. The options proposed by the Franchising Taskforce range from maintaining the status quo to far more interventionist options. The RIS highlights the dilemma in getting the balance right. For example:
Despite the Franchising Code of Conduct having been reviewed on several occasions, and material amendments taking effect most recently in 2015, it is unlikely that the outcome of the Taskforce’s process will be a recommendation to maintain the status quo in all material respects. Rather, it is likely a number of substantive changes advocated by the Committee, and being explored by the Franchising Taskforce, will be adopted. The RIS highlights that the Franchising Code of Conduct could at least benefit from clarification and elaboration on a number of points where the Code is ambiguous or silent.
As the Franchising Taskforce is comprised of Government departmental representatives, it is likely that the recommendations of the Franchising Taskforce will ultimately be adopted by the Government in response to the Committee’s Report. Franchisors, in particular, should be mindful of what the Franchising Taskforce is exploring as policy problems and whether their business models could benefit from review in the interim in anticipation of potential changes.
If you have queries about the Fairness in Franchising process or issues identified to date, or are considering making a submission on the RIS, do not hesitate to contact Gadens’ franchising team for guidance.
Adam Walker, Partner
Lisa Haywood, Lawyer