The ACCC has announced that it will commence a new round of audits focusing on franchises in the takeaway food and health and fitness industries.
Under section 51ADD of the Competition and Consumer Act, the ACCC has the power to audit documents required to be generated under the Franchising Code of Conduct, such as disclosure documents and marketing fund statements.
The audit power was introduced in 2001 and since then the ACCC has audited over 50 franchisors.
The new round of audits comes as a response to the ACCC having received 740 complaints and 114 enquiries about people involved in franchising in the past year.
The takeaway food and health and fitness industries have been targeted as they generate a disproportionate number of these complaints. However, the ACCC has not confined the new audits and will extend the scope to other industries.
Common issues raised include franchisees frequently not receiving disclosure documents and disclosure documents not being up-to-date or not including important information. More than 100 complaints allege false representations and misleading conduct, many relating to claims made by franchisors about potential earnings.
The audits were announced by ACCC deputy chairman, Dr Michael Schaper, at the National Franchise Convention Legal Symposium.
Dr Schaper also noted that the ACCC had made submissions on the new Franchising Code of Conduct Review suggesting that the scope of the audit power be extended to enable the ACCC to more accurately assess a franchisor’s level of compliance with the Code.
The ACCC has also published a new guide for franchisors and franchisees focusing on competition issues in franchising supplier arrangements, including rebates and quality standards.
Click here to read our article on the review of the Franchising Code of Conduct.