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Franchise sector run ‘by lawyers, for lawyers’

Franchise sector run ‘by lawyers, for lawyers’

Australia’s franchise king, Jim Penman of Jim’s Group, has lashed out at the legal and parliamentary community for doing “an appalling job” of protecting franchisees.

Mr Penman, whose well-known property and business services brand has successfully franchised almost 60 separate divisions since 1989, lambasted the poor policy frameworks that have created the myriad of problems we are now witnessing across various franchising businesses.

Most recently Mortgage Choice copped public criticism over its approach to and management of franchisees. But so too have Caltex, 7-Eleven, Retail Food Group and Craveable among others.

Other examples of poor or downright irresponsible conduct by franchise networks were raised during the third round of hearings at the banking royal commission, such as Bank of Queensland franchisees solely earning commissions, and Pie Face advising a franchisee that they had to transfer all of their banking to Westpac because it was partnered with the bank.

“I think the government has done an appalling job of protecting franchisees,” Mr Penman told My Business.

“All this stuff is [overly] legalistic: if your main purpose is to be a feeding trough for lawyers, the government has done a fantastic job. If you’re talking about protecting franchisees, what they’ve done is pathetic in the extreme.”

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According to Mr Penman, many lawyers do not even understand product disclosure statements, let alone the franchisees for whom they are supposed to inform.

“The only good about the [Franchising] Code of Conduct is that it demands that the franchisor give the list of current franchisees to a prospect — that is useful,” he said.

“What they ought to do, if they really want to some good to protect the franchisees, is get someone to do a survey of every franchisee every year.

“If that was done officially, and then everybody who wants to sell a franchise has got to produce the results of that survey, that would mean the shonky operators — and there are enough of them — would get killed in the marketplace.”

And far from being a new concept, Mr Penman said he has repeatedly put this idea forward to successive government inquiries — including a written submission to the current parliamentary inquiry into the franchising sector — to no avail.

“It wouldn’t even be expensive, it would cost almost nothing, because you just get a few bucks per franchisee charged and you get some independent body to do it,” said Mr Penman.

“It’s like the food labelling system or energy ratings or MySchools where the government organises information so that people can make up their own mind. That is so powerful. So why can’t they do it? Why are franchisees not important enough to protect?”

However Mr Penman suggested the answer to this question is that most politicians are themselves lawyers, and as such, are unwilling to rock the boat for their professional peers.

“It is run by lawyers, for lawyers,” he said.

“I’m not saying that all lawyers are bad either; I’m just saying that having a system that is run purely to benefit lawyers with stuff-all interest in the protection of ordinary people is not a good system.”

Franchise sector run ‘by lawyers, for lawyers’
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