Minister reprimands franchisors for fee-charging struggling franchisees

By Sarah Stowe | 15 Apr 2020 View comments

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.

Minister for Small and Family Business Michaelia Cash has raised concerns about reports of some franchisors continuing to charge franchisees regular fees despite their businesses being temporarily closed or suffering a significant loss of income.

Instead Minister Cash advised franchisors to waive, reduce or defer their fees in the coming months while businesses are affected by the impact of the coronavirus.

Minister reprimands franchisors

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,” 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”.

A breach of the good faith provision of Franchising Code carries a civil penalty of up to $63,000.

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