Franchisors under pump from ACCC

Posted by AFN Staff Writers on 11th July 2012

As Australian Food News reported last week, Brumby’s Bakery made the mistake of suggesting in its internal newsletter that its members should raise their prices and blame the recently introduced Federal government Carbon Price.

Since then, Brumby’s Bakery has officially apologized, its managing director Deane Priest has resigned, and the company has released a new advertising and social media campaign to re-assert its good reputation.

The Brumby’s Bakery social media campaign appears to have a focus on personalising Brumby’s Bakery franchises and separate the individual staff members from the company’s recent controversy. Print advertising includes the phrase, “Please don’t blame the franchisees at your local Brumby’s store. At the heart of every Brumby’s store are hard-working passionate people running a small business. Please continue to give them your support.”

Coinciding with the Brumby’s Bakery Carbon Price controversy, the Franchise Council of Australia (FCA), , which is the peak body for the $128 billion franchise sector in Australia, and the Australian Competition and Consumer Commission (ACCC) have released further advice and general warnings to franchise operators and potential buyers of franchised businesses.

FCA warns about liability

The FCA has warned its members that they are still liable for illegal price rises, even when the rises are advised from the franchise’s head office.

The FCA also advised that small businesses, including franchisees, should ensure that they are informed about the implications of carbon tax and pricing.

ACCC general advice for franchises or potential buyers of franchised businesses

The ACCC, which is still looking into the Brumby’s Bakery case, has suggested that all franchisees ensure they have access to their own individual legal advice.

The ACCC has now also warned franchisors and potential franchisees to take steps to check and substantiate claims made about potential income of a franchise.

The warning follows a number of recent complaints to the ACCC by franchisees who alleged that they were promised a minimum ‘guaranteed’ income but then derived little or no income from their franchise. Although many of these complaints related to franchisors in the cleaning and home services sector, but a representative from ACCC told Australian Food News that the warning also applies to the food industry.

The ACCC has been promoting a free online education program, run by Griffith University, to help prospective franchisees make more informed decisions about acquiring a franchise. See here.