The ACCC has released COVID-19 information for businesses including information for franchisors and franchisees. In this article we take at look at the guidelines.

Introduction

In its information release the ACCC has highlighted the need for franchisors to be aware of their obligations including:

-the obligation to act in good faith

-the obligation not to engage in misleading or deceptive conduct

-the obligation not to engage in unconscionable conduct.

In addition the ACCC has highlighted that unfair terms in standard form contracts may be declared void by the Court.

The ACCC has further addressed a number of frequently asked questions which we have set out below.

As a franchisor, can I change the services my franchisees provide to customers?

The franchisor and franchisee can agree to make changes to a franchisee’s customer offering on a temporary basis, in whole or in part. This may be dependent on whether the change is material and the customer agrees to the new service.

Franchisors are expected to clearly communicate and continuously consult with franchisees on any changes they propose to make.

If a franchisee does not agree to proceed with a material change proposed by the franchisor that is outside the terms of the franchise agreement, the ACCC expects the franchisor will not charge any new or additional fees to the franchisee for this changed service.

As a franchisor can I continue to charge the fees I normally would under the franchise agreement?

Where there has been a direct impact on the services provided to franchisees, the ACCC expects that franchisors will be adjusting the fees and payments they usually charge to franchisees, so that franchisees are not paying for services they are not receiving.

Franchisors should also be proactively reviewing what services and costs they pass on to franchisees and should consider whether it would be appropriate to cancel them or suspend them in order for savings to be passed on. This may include suspending or cancelling conferences and marketing services.

Franchisors should ensure they have open and transparent communications with their franchisees and are appropriately passing on the benefits derived from these negotiations to franchisees, such as rent reductions.

As a franchisee I am having trouble meeting my contractual obligations what can I do?

The ACCC suggests that you might consider asking the franchisor to:

-delay, suspend or reduce fees such as marketing or service fees on the basis of your reduced income and/or if the franchisor is unable to provide (either in whole or in part) the service those fees were charged for.

-allow changes to business practices that will allow you to continue trading where possible, such as seeking lower-cost supplies, relaxing supply restrictions or adjusting opening hours.

Can I be excused from or suspend my contractual obligations?

Every franchise agreement is different, so it is important to carefully review your agreement for any clauses (such as force majeure clauses) that may allow you to vary, suspend or excuse you from the performance of your contractual obligations.

The ACCC has emphasized that it is important to obtain legal advice on contractual issues.

I have tried to engage constructively with my franchisor but still cannot resolve the dispute. What next steps are available to me?

If you are unable to resolve your concerns through informal means, you have the right to formally raise a dispute with the franchisor in relation to any matter arising under your franchising relationship.

The ACCC advises that if you think that the franchisor is acting unconscionably in the circumstances, or is not acting in good faith in their dealings, you can report it to the ACCC via their online portal.

How do I know if my franchisor is not acting in good faith?

The good faith obligation includes acting honestly, co-operatively, and with due regard to the rights and interests of the other party, but does not prevent a party from acting in their own legitimate commercial interests.

When considering whether your franchisor is acting in good faith, the ACCC suggests that potential questions to ask include:

Is the franchisor making timely decisions?

Is the franchisor consulting with franchisees regarding issues or proposed changes?

Is the franchisor imposing conditions on franchisees that are not necessary to protect its interests?

Is the franchisor genuinely attempting to resolve the dispute?

Is the franchisor acting for some ulterior purpose?

Further COVID-19 Information

Should you require further information on these or any other franchising issues contact us.

Disclaimer

The information in this article is general in nature and is not intended to address the circumstances of any person or other entity. Although we do our best to provide timely and accurate information, we do not guarantee that the information in this article is accurate or that it will continue to be accurate in the future.