Franchisors need to beware of a new push by the Australian Competition and Consumer Commission (ACCC) to change the image of the franchise industry through the enforcement of their increased powers acquired under the new Competition and Consumer Act.
Much has been written about the ACCC's power to serve substantiation, infringement and public warning notices. Recently however, there has been a lot of focus on the power given to the ACCC to provide audit notices to franchisors for the production of a range of documents.
The Act provides grounds for the ACCC to compel a franchisor to provide it with any documentation, or information, it is required to produce to its franchisees and keep under the Franchising Code.
The burden that the new provision places on franchisors is quite significant. For instance:
- If given a written notice, a franchisor has 21 days to produce the relevant documents;
- Franchisors can seek an extension to this 21 day period, however this must be sought in writing and made within the 21 day period;
- It is important to note that in no way is the ACCC obliged to accept the request for a time extension, purely because it was applied for, and any request for an extension of time will be determined on a case by case basis;
- Whilst there are currently no penalty provisions dealing with a franchisor's failure to comply with the ACCC's audit notice, a failure to comply with the notice would constitute a breach of the Act.
The ACCC has exercised this power previously. More recently, they have given warnings to the industry preparing them for an increase in random audits that they will carry out to ensure that franchisors are complying with the Code.
What Can You Do?
It is important to note that the provisions aren't there merely for process. The ACCC has made it very clear that it will apply them, and in fact, it has already.
It is critical that you keep and archive all documents and information that you are required to provide to your franchisees, or prospective franchisees, under the Code. You should also check your operating systems and see whether you would be able to comply within 21 days of receipt of an audit notice. If not, then new systems will need to be implemented to ensure compliance in the event that you are audited.
There is no guarantee that if you are served with an audit notice and seek a time extension, that the ACCC will grant one. There are no short cuts or ways around this provision- you must comply.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.