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Franchisors must deal in good faith

6 April 2020

The spread of the coronavirus has put immense pressure on small businesses to continue operating and keeping Australians employed.

Minister for Small and Family Business Michaelia Cash said she was very concerned with reports that some franchisors are continuing to charge their franchisees regular fees whilst their businesses were temporarily closed or suffering a significant loss of income.

Minister Cash said that franchisors should be working with their franchisees to waive, reduce or defer their fees in the coming months, whilst these businesses are affected by the impact of the coronavirus.

The Minister said she would pursue any reports of franchisors acting unreasonably towards their franchisees during this time.

“During such challenging times, the last thing small business operators need are for their franchisors to continue to charge fees while their doors are closed,” Minister Cash said.

“When there is no money coming through the door, it is simply unacceptable that big business would compound small operators’ problems with more bills."

The Franchising Code of Conduct makes it clear “each party to a franchise agreement must act towards another party [to the agreement] with good faith”.

Minister Cash said that a franchisor charging a franchisee their full fees while their doors are closed could potentially be in breach of the obligation to act in good faith. A breach of the good faith provision of Franchising Code carries a civil penalty of up to $63,000.

There are around 101,000 franchisees operating in Australia, which are predominantly made up of small and family businesses. They have a revenue in excess of $184.1 billion and employ over 598,000 people.

“I would encourage franchisors to take this opportunity to step up and assist their franchisees and employees during this difficult time,” Minister Cash said.

Franchisees can contact the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) or their small business ombudsman for assistance resolving a dispute, or make a report to the ACCC at www.accc.gov.au/contact-us/contact-the-accc/report-a-small-business-issue.

Media contact: Minister Cash's office 02 6277 7610