Franchises
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Franchising Code of Conduct
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At the very heart of the franchise business model are the concepts of standardisation, consistency and uniformity of process. The nature of each franchisor’s relationships with its individual franchisees is determined by its franchise agreement and the now mandatory Franchise Code of Conduct.
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Whilst operating a franchise system presents considerable benefits to a franchisor, it also brings with it a wide range of risks and obligations that are unique to the franchise industry. Key risks for franchisors relate to the maintenance of quality control and operational standards as well as compliance with legal and regulatory obligations.
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The key to mitigating these risks, and to building a valuable franchise business, is to have clearly articulated standard operating procedures, to effectively communicate and train these procedures and to implement effective risk management and compliance systems. To assist franchisors develop effective systems, the ACCC has published detailed guidelines aimed specifically at franchisors.
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The focus of the ACCC’s recommendations has been on documentation and practical implementation of policies and procedures. While many franchisors have, to date, managed to operate with manual paper based systems, the shear complexity of the regulatory environment and the demands of managing effective risk management and internal control programs have now made this approach largely untenable.
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Simply put it is now both a legal and commercial imperative for franchisors to establish internal risk and compliance systems that work effectively. Remember it only takes one franchisee to do the wrong thing to damage the reputation of the franchisor’s brand!
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General Law Obligations
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As a director or executive of a franchisor not only do you have to deal with a volume of specific laws and regulations relating to the franchise industry, you also have to deal with a vast body of general legislation, which in Australia is growing at the astonishing rate of 10% each year.
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Occupational health & safety, workers compensation, privacy, industrial relations, and consumer protection laws are just a few of the areas that are likely to impact on your business on a day-to-day basis.
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We recognise that many franchisors are small-to-medium-sized enterprises that are focused on their core product or service offering and often have limited resources available to dedicate to:
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- tracking their legal obligations
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- translating them into documented policies, and then
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- effectively communicating these policies to their employees.
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It is, in fact, the small and medium sized enterprises in Australia that bear the brunt of costs associated with non-compliance. Fines, penalties and legal fees are just the beginning. The real costs of non-compliance are often hidden and include management downtime, business disruption, reputational damage, loss of key staff and increased insurance premiums.
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As a franchisor the pain is often multiplied by the fact that you are “under the regulator’s spot light”. Compliance breaches have the potential to become very public with resulting reputational damage having the potential to negatively impact on your business.
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