ACCC To Target Food Services Sector
By Raynia Theodore, Principal, MST Lawyers
In media release of 7 February 2019, the ACCC announced that café, restaurant and take away food services industries will be the target of the ACCC’s next round of Franchising Code compliance checks. The ACCC also made comment that, in line with its Compliance & Enforcement Policy, it may consider enforcement action against franchisors where it amounts to a breach of the Franchising Code or the Australian Consumer Law.
The ACCC will focus on the following parts of the Disclosure Document:
- Disclosure of costs of establishing and operating a franchise business
- Disclosure of limitations on where franchisees can buy goods and services
- Disclosure of whether a franchisor receives rebates or benefits when franchisees purchase from certain suppliers
- Disclosure of site or territory history
- Disclosure of cooling off costs
- Disclosure of current and former franchisee contact details.
We recommend franchisors review the information provided in their Disclosure Documents, in particular the level of detail provided and amend their Disclosure Documents, if required, before the ACCC comes knocking.
It is important that franchisors to regularly check the information provided in their Disclosure Documents and ask whether its contents are correct or convey a false or misleading impression. Despite the fact that the Franchising Code of Conduct only requires franchisors to update their Disclosure Documents annually within 4 months of the end of the Franchisor’s financial year, the Code requires franchisors to disclose to franchisees materially relevant facts within a reasonable time (not more than 14 days) of the franchisor becoming aware of the fact. Materially relevant facts include:
- a change in majority ownership or control of the franchisor or an associate of the franchisor or the franchise system;
- a change in the intellectual property or ownership or control of the intellectual property that is material to the franchise system;
- certain legal proceedings and certain judgements against the franchisor or an associate of the franchisor.
The annual update requirement and the obligation to disclose materially relevant facts are the minimum standard for ongoing disclosure. Franchisors need to take care that their Disclosure Documents do not become misleading or deceptive because relevant information is omitted or not updated..
MST lawyers has been assisting Franchisors with completing Disclosure Documents since the Franchising Code first came into effect in 1998 and can assist with reviewing and updating Franchisor Disclosure Documents.