Franchise News | Tasmania
Welcome to the Greyson Legal media room. We have highlighted information specifically focused on the franchising sector in Tasmania.
For assistance with franchising, contact Greyson Legal | Tasmanian Franchise Lawyers: mail@greysonlegal.com
Franchisee Underpaying Workers in breach of Fair Work Act 2009 (Cth)
Retail Food Group (RFG) promotes itself as Australia's largest multi-brand retail food and beverage franchise owner.
Crust Gourmet Pizza is one of the brands owned by RFG.
The Fair Work Act 2009 (Cth) sets out minimum rates of pay and laws in relation to discrimination.
In late 2019 the Fair Work Ombudsman successfully pursued legal action against the operator of a Crust Gourmet Pizza outlet in North Hobart - QHA Foods Pty Ltd. The company and its directors were fined $104,000 for contraventions of the Fair Work Act 2009 (Cth).
A failure to comply with statutory requirements not only exposes a franchisee to fines and other consequences for a breach of statute, but also exposes the franchisee to defaulting under their Franchise Agreement, which could lead to termination of the Franchise Agreement or other adverse consequences.
If you are unsure of your legal obligations, obtain appropriate legal advice. For further assistance with franchise law matters, contact Greyson Legal | Franchise Lawyers | Tasmania.
Buying a Franchise is Not Without Risk: A cautionary tale
The Wendys Ice Cream brand started in Australia in around 1979. Since then many people invested and became owners of a Wendys ice cream franchise.
During the period 2006 to 2014 Wendys franchise model came under increasing pressure from competition and other factors. SmartCompany stated 116 Wendys outlets either collapsed or were bought back during that period.
In 2014 Wendys was sold to a Singapore-based conglomerate - Global Food Retail Group.
SmartCompany reported that a Mr. Ian O’Neill owned the Wendys franchise in Kings Meadows, Launceston, Tasmania from around the year 2000 to 2008.
Mr. O'Neill is reported by SmartCompany to have experienced numerous irregularities with the Wendys franchise model during his time with them, including as to:
misrepresentations by the franchisor
issues with store refurbishment
lack of proper franchisor support
concerns around pricing discounts
product give aways
etc
This reportedly led to Mr. O'Neill suffering personal stress, issues at home, along with financial pressures.
The issues experienced by Mr. O'Neill as part of the Wendys franchise model are unfortunately not isolated. Various other franchise systems have come under scrutiny.
The Australian Government has issued a Report into the operation and effectiveness of the Franchising Code of Conduct ("Fairness in Franchising").
It is anticipated a number of changes will be made to the Franchising Code of Conduct in early 2021. These changes will be aimed at imposing further more stringent obligations on franchisors and provide better consumer protections for franchisees.
Franchising can, in the rights circumstances, be a rewarding experience. But there are risks involved. Our recommendation is to obtain appropriate legal advice before entering into any franchise agreement.
Contact Greyson Legal | Tasmanian Franchise Lawyers for details on how we can help you.
Franchisee in Liquidation - there are no Winners!
The Franchisee for Hotondo Homes, Hobart (Tasmanian Constructions Pty Ltd) has entered into external administration.
This will lead to a liquidator being appointed, the assets of the company sold off and the company wound up / closed.
However, as with many liquidations there is usually insufficient assets to pay the liquidator, creditors or others owed money, such as, employees, contractors, the Commissioner of Taxation, etc
As the Hotondo Homes, Hobart Franchisee is a building company, it is likely that liquidation will result in prospective home owners awaiting their home being built losing money they may have paid in advance.
The liquidation would trigger:
enforcement rights in favour of the Franchisor to terminate the Franchise Agreement;
rights of home owners to terminate their building contracts;
rights of termination in favour of other creditors; and
personal liability for the company directors where personal guarantees have been provided; or where statute prescribes personal liability arise (eg. in situations involving insolvent trading).
It is important to understand that the Hotondo Homes, Hobart Franchisee (Tasmanian Constructions Pty Ltd) is a separate entity to the Franchisor. As such, creditors and others would have no right of action against the Franchisor directly.
It is feasible that the Franchisor may step in (on a good will basis to protect its overall brand) by allocating another Hotondo Homes Franchisee network to complete unfinished the home building works. This would depend on specific arrangements between the home owner and Franchisor / alternate Hotondo Homes Franchisee.
As at January 2022 there is currently no statutory home owner warranty insurance scheme in Tasmania (like there are in other States of Australia) to help protect home owners where building works are incomplete due to a builder going into liquidation.
The Tasmanian Government recently provided an update on potential financial assistance to home owners affected by the failure of Hotondo, Homes - Hobart. Follow this link or contact the Consumer, Building and Occupational Services for more details.
The Tasmanian Government are also looking to reintroduce a home warranty insurance scheme.
If you need help with franchising, contact Greyson Legal | Franchise Lawyers | Tasmania.
Franchisors be warned. Franchisee non-compliance with workplace laws can result in Franchisor liability !
CW Retail Services Pty Ltd is the franchisor of a franchise network of retail pharmacy businesses. It trades under the brand, "Chemist Warehouse".
There are over 300 stores nationwide, including Hobart and Launceston, Tasmania.
Each of the Chemist Warehouse outlets operates under a franchise arrangement.
Following an audit by the Fair Work Ombudsman in 2015, a significant number of employees of franchised outlets across the Chemist Warehouse franchise network were found to have been underpaid in relation to compulsory on-line training carried out by franchisee employees.
Over $3.5 million was back paid by Chemist Warehouse and liable franchisees to employees.
The Fair Work Ombudsman and Chemist Warehouse also entered into a "Proactive Compliance Deed" designed in part to ensure future compliance by Chemist Warehouse and its franchisees with the Fair Work Act 2009 (Cth).
Underpayment of employees within the franchise industry as a whole had been a growing issue for some time. In September 2017 the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 became law.
The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 introduced a range of measures, including an increase in the maximum penalties for employers who deliberately flout the minimum wage and other entitlements under the Fair Work Act 2009. Some of these changes were:
increased penalties for ‘serious contraventions’ of workplace laws
employers cannot ask for ‘cashback’ (or payments) from employees
increased penalties for breaches of record-keeping and pay slip obligations
stronger powers given to the Fair Work Ombudsman in relation to its investigations
new penalties for giving false or misleading information to the Fair Work Ombudsman, or hindering or obstructing their investigations.
Importantly, the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 provided that to the extent a Franchisor has a significant degree of influence or control over their franchisee's affairs - Franchisors (or their officers) can potentially be held responsible if their franchisees do not follow workplace laws.
So, it is no longer tolerated for Franchisors to turn a blind eye to contraventions of workplace laws by franchisees. It will be important for Franchisors to incorporate internal organisational processes to show they have taken all reasonable steps to prevent franchisees from contravening workplace laws.
If you are a Franchisor and need help with:
best practices to ensure you comply with your lawful obligations; and
how to demonstrate you are being proactive in minimising franchisee non-compliance,
in regards to workplace laws, contact Greyson Legal | Tasmanian Franchise Lawyers.