The watchdog tasked with regulating Australia's $170 billion franchising industry is calling for a massive overhaul of the rules governing the sector. The ACCC says the franchising code of conduct isn't fit for purpose.
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00:00 Well there have been many scandals over the years. There's a real power imbalance between
00:07 franchisors who run the system and the franchisees who are small businesses who buy into the
00:14 system. And we've seen case after case over the years with Domino's, Pizza Hut, 7-Eleven
00:21 where the franchisees have been gouged and many of them leave the system and they've
00:27 lost their life savings. Yeah the 7-Eleven case is probably the most
00:31 egregious where there was a huge underpayment scandal usually of migrant workers who didn't
00:37 necessarily know their rights. Yeah that's right. So what happened was the
00:41 franchise system, the business model was very brutal. Franchisees couldn't make money so
00:46 they were trying to find ways to cut corners and there's never a good reason to do it but
00:51 what they were doing was they were underpaying workers. Some of them were getting paid $5
00:56 an hour which is slave labour and it was systemic and they had to repay almost $200 million
01:03 in underpayment. The ACCC is proposing a licensing model and
01:10 a code of conduct. What would that mean when a franchise is found to be doing the wrong
01:14 thing say in like the 7-Eleven case? Yeah so what they're saying is that the current
01:19 system which is the franchising code isn't fit for purpose and there is a review by Treasury
01:25 into whether the franchising code is the best way to regulate the franchise industry and
01:31 what the ACCC is saying which is the regulator, there should be a licensing system so that
01:38 if a franchisor is not doing the right thing they can suspend them immediately or amend
01:42 their conditions. Right now it's very slow and very sluggish.
01:48 As you say Treasury is reviewing the franchise system, that's the first time that's happened
01:51 since 2008. Do you think there is political will for change in this space?
01:57 This is the question, who would know? Many in the industry, I've already written this
02:03 column this morning and I've already had so many franchisees saying I wish I'd read this
02:08 18 months ago when I bought a franchise, let's hope there's change. So out there in the community
02:16 where there are all these franchisees, there's a willingness for change.
02:22 So what is it exactly that they want to see changed, the franchisees themselves?
02:26 They want to have more rights. Right now they don't have any rights, all of the power is
02:31 with the franchisor and the ACCC says they're like the ambulance at the bottom of the cliff,
02:36 they can only do something when the harm has been done and that's really too late.
02:41 [BLANK_AUDIO]