The Franchising Code of Conduct is a code that sets out the standards for franchisors and franchisees. A franchisor is an organization that grants rights to third parties, typically individuals or groups, to use its trademarks and trade dress in exchange for a fee. A franchisee is a person who has been granted these rights by a franchisor. The Franchising Code of Conduct was established as part of the Competition Policy Reform Act 1992 (CPRA). It reflects some aspects of common law principles related to restraint on competition but also modernizes those principles with respect to new forms of business relationships such as franchises.
The franchising code is a set of standards that every franchisee must meet in order to operate their business. Franchises are often seen as a safer investment because they have a higher success rate than independent businesses, and the franchisor will provide training, marketing materials, and other support.
Introduction – Franchising Code Essay
For protection and consumers, many acts have been formulating in all countries. The following paper throws light on the Franchising Code of Conduct and Competitor and Consumer act, which has been developed for fair trading and protecting customers (Latimer, 2012). The paper explains in detail the acts, their functioning, and the changes that have been made in their functionality. Along with this some recommendations are also proposed for making a positive change in the acts and improve their impact and functionality.
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Competition and Consumer Act came into being on January 1, 2011. This act was also known as Trade Practices Act, 1974. This act is administered by the Australian Competition and Consumer Commission (ACCC), which is an authority of the Australian Government formed with the amalgamation of the Australian Trade Practices Commission (TPC) and Prices Surveillance Authority. The act’s main purpose is to protect the consumers by promoting competition and fair trade.
This act also aims at the better relationship amongst the various members of the supply chain- suppliers, wholesalers, retailers, competitors, and customers. This act includes those people that are involved in act of doing business outside the national boundaries (Asbill & Goldman, 2001). The Competition and Consumer Act has established four organizations viz- Australian Competition and Consumer Commission, National Competition Council, Australian Competition Tribunal, Australian Energy Regulator.
Franchising code of conduct
The franchising code of conduct came into being in July 1998 to regulate the Australian franchise sector. This encouraged the franchisers to work under the expert team with franchising experience. The idea of the act is to make sure that the members behave cordially and fairly with each other. This also aims at disclosure of various documents by all the franchisors- a disclosure document, a copy of the franchise agreement, and the dispute resolution procedures for the franchisees and franchisors (Latimer, 2012).
This act led the franchisers to stay in peace by freeing them from the burden of getting prior registration, they were now only asked to follow the compliance. The amendment in the act was made three times before the final law came into being in July 1988. Anyone found guilty of breaching the franchising code of conduct act leads to punishment as per the law.
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The importance of the Competitor and Consumer act, 2011 lies in the fact that this act aims at providing equal opportunities to all the businesses irrespective of their size, thereby promoting and emphasizing fair competition. As per this act, a business gets the freedom of taking private actions. This law provided the following advantages:
Let the businesses compete fairly.
Collective bargaining to the small businesses.
Protection against misleading conduct.
Not letting the big players fixing prices for a product.
Protection against market sharing agreement (Malbon & Bishop, 2006).
Protection towards customers against unfair trade practices.
Immunity from legal actions.
Protection towards customer guarantees.
Check limitation and prevention of competition (Malbon & Bishop, 2006).
Importance of franchising code of conduct
The franchising code of conduct helps in protecting the franchising members against each other by asking the franchisor and the franchise to disclose certain factors and facts set certain set procedures in transactions and dealings (Giddings, Frazer, Weaven, & Grace, 2009). The main importance of the franchising code of conduct act lies in three main areas:
Secondly, this also helps in ending the franchise agreements under some circumstances which may be the breach of agreement details by the franchisee, before the expiry other certain reasonable reasons and some special circumstances like- bankruptcy, serious offense by the franchisor, etc. ( Giddings, Frazer, Weaven, & Grace, 2009).
Thirdly, this act gives a specific set of procedures to be followed at the time of disputes between the franchisor and the franchisee. The act says that disputes should primarily be resolved between the parties. In the absence of any conclusion between them within the next three weeks, those parties should allow a third-party intervention to resolve the dispute.
Changes made to code of conduct
The franchising code of conduct aims to make sure that the members behave in order with each other. The Franchising code of conduct was amended in 2008 and 2010. In 2008 it was amended under the review by Mr. Greame Matthews. The new law stated that the reviewer is required to inquire into- good faith of franchising, the right of franchisees. For this, the reviewer is asked to prepare a report consisting of findings and recommendations so that it can be released for public preview. For this, the reviewer can also seek the help of the various stakeholders (Spencer, 2006).
The new changes also stated that the Franchisees are entitled to more information before entering into the treaty. This also leads to an increase in the franchisor’s disclosure of the obligations. The code also aims at ensuring all the terms and conditions made in the agreement by the franchisees. All the documents should reach 14 days before the deal. The main changes include: remedies in case the franchise fails, a payment that is to be made to the mediator, attribution of the legal cost, maintaining confidentiality, procedures for ending the agreement, rules for transferring the franchise pact, unilateral variation, etc. (Spencer, 2006)
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The Government of every country tries to make every possible step to prevent the citizens from unlawful activities. Out of those various laws, the two laws which have been discussed show the basic rules made towards the franchise system and competition and consumer protection. Both the laws deal with two different aspects of the market, the former deals with the rules and regulations made for the franchisers and franchisees while the latter deals with consumer protection and fair trade practices with the competitors. The franchise idea can always not proved to be successful as most of the cases often lead to conflict and thus leads to the solvency of the franchise. Both the franchisor and the franchisee are consumers themselves should keep their eyes open and report in case of any unlawful activity. Certain preventive measures can help tremendously in improving the system.
References
Asbill, R.M. & Goldman, S.M. (2001). Fundamentals of international franchising. US: American Bar Association.
Davis, P. (2005). Retrieving corporate policy: managing minority dissent. Corporate Governance, 5(4), pp. 64-74.
Giddings, J., Frazer, L., Weaven, S. & Grace, A. (2009). Understanding the dynamics of con? ICT within business franchise systems. ADRJ, 20, pp. 24-32.
Jankalova, M. & Jankal, R. (2003). National legislation related to franchising and its aspects in conditions of selected countries. Journal of Information, Control and Management Systems,1(2), pp. 1-10.
Latimer, P. (2012). Australian Business Law 2012. CA: CCH Australia Limited.
Loewinger, A.P. & Lindsey, M.K. (2006). International Franchise Sales Laws. US: American Bar Association.
Lozada, H.R., Hunter, R.J. & Kritz, G.H. (2006). Master Franchising as an entry strategy: MArketing and legal implications. The Coastal Business Journal, 4(1), pp. 16-28.
Malbon, J. & Bishop, B. (2006). Australian Export: A Guide to Law and Practice. UK: Cambridge University Press.
Outhred, H. (1998). A review of electricity industry restructuring in Australia. Electric Power Systems Research, 44, pp. 15–25.
Paterson, J. M. (2001). Good Faith in Commercial Contracts? A Franchising Case Study. Australian Business Law Review, (270).
Spencer, E. (2006). Franchising- A way to supersize a business?The National Legal Eagle, 12(1), pp. 1-6.
Terry, A. & Lernia, C.D. (2009). Franchising and the Quest for the Holy Grail. Melbourne University Law Review, (33), pp. 543-575.
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