ASX-listed finance brokerage Mortgage Choice has hit back at high-profile allegations by many of its franchisees that its business model is pushing them to the brink, in the latest scandal against a well-known franchise network.
A group of franchisees alleged that Mortgage Choice was bleeding them dry and its policies had led to a culture of poor practice.
Mortgage Choice hit back at the franchisee claims about poor practices, but conceded that its remuneration model was in need of updating, which it is in the process of doing.
“Mortgage Choice strongly refutes allegations in the media that its current model encourages poor behaviour or practices. The company has robust compliance processes and credit policy controls in place that franchisees are required to adhere to,” the company said in a statement to the ASX.
However the company admitted that “the balance between services offered and remuneration provided needs adjusting”, with the new remuneration model due to be implemented by August this year.
This process is being designed to “increase franchisee remuneration and reduce franchisee income volatility”.
“This change program has been the key priority for the business in 2018 and is expected to underpin the long-term sustainable growth of the Company and its existing franchisees, as well as to attract new, high quality businesses to the franchise network,” the statement said.
“Our franchise system introduced over 25 years ago was designed to allow mortgage brokers to own and grow their own small businesses with the support of a strong market brand and full‐service model which included business planning, marketing, IT, training and compliance.
“This was reflected in the remuneration structure which has been very effective, with hundreds of brokers who have successfully started, grown and sold their businesses and helped hundreds of thousands of customers over the years.”
Mortgage Choice added that it has offered “personalised assistance to franchisees who have experienced financial difficulty, suffered health issues or had changes in their family circumstances”, and as such denied claims made to the contrary.
The allegations made by Mortgage Choice franchisees reflect those made recently by a group of franchisees within the Red Rooster and Oporto chains. Concerns were also raised in the most recent round of hearings at the banking royal commission that commission-only structures for Bank of Queensland franchisees (which it calls owner managers) are leading to poor lending and compliance practices.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.
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