The Victoria Automotive Chamber of Commerce is recommending changes to Australia’s franchising code of conduct to make it fairer for vehicle retailers.
The Australian government is asking for written comments on possible amendments as the Federal Parliament’s joint committee on corporations and financial services conducts an inquiry into the law.
VACC Executive Director David Purchase says many of the organization’s 5,500 members are licensed traders or retailers of motorcycles, trucks, tractors, outdoor power equipment, car servicing, fuel or motor accessories who operate under a franchise.
“We have found in the majority of cases, the franchise agreement is weighed in favor of the franchisor,” he says. “The agreements can be controlling and often leave the franchisee in a precarious position.
“VACC is seeking a more balanced relationship between franchisor and franchisee. In particular, we recommend the code of conduct contains an explicit obligation for business relationships to be undertaken in ‘good faith.’”
The group says a “good faith” clause would minimize behavior that potentially can lead to disputes.
This would encourage an overarching obligation for franchisors and franchisees to behave fairly during all stages of a commercial relationship, including dealing with termination, renewal and marketing.
It also wants the code to mandate additional, specific disclosures regarding business costs in franchise agreements.
VACC is seeking the disclosure of either renewal or non-renewal contractual franchise arrangements within an acceptable timeframe for both sides to move forward with minimal disruption to their commercial relationships and business operations.
Purchase says conflicts arise when definitions in an agreement are unclear.
“A clear franchising code of conduct will enable franchisors, franchisees and potential franchisees to establish a framework (that) encourages good business practice for the benefit of all parties, which in turn will benefit the Australian economy,” he says.