Franchisees have not made a single submission to a parliamentary inquiry into the sector, and some cite concerns that speaking out would violate agreements heavily weighted in favour of brand owners.
The inquiry, established last month by Nationals MP John Williams, was set up to scrutinise the relationship between master brand companies and the small businesses they licence to operate.
But franchisees have told Guardian Australia that relationship has been tipped so far out of balance they cannot even contribute to the debate.
One business owner said the inquiry needed to do more to encourage anonymous or unpublished submissions.
“We have an agreement with the master franchise. They don’t come close to keeping up their end of the bargain … but we could find ourselves in trouble for breaching it by even making a submission or talking to [the media]. We are supposed to act at all times in the interest of the brand,” he said.
“I’ve been following [stories about franchising], but people who have spoken out so far, they’ve already been driven out of business. They’ve passed the point of no return. We are ploughing on, and while we are still serving customers there’s nothing to be gained.
“The master franchise continues to take their royalties, but since we bought the business the support has been less and less, to the point it’s not even clear what they do for us anymore. We think they’re trying to drive us out of business, take it back for nothing, and sell it again.
“Sure, I’d like everyone to know they way they have acted, but until I do go broke, I’ll have to deal with that situation myself. Legal action is a better option [than a making a submission]. The ones I feel for are people who have lost so much already they can’t afford to take legal action.”
Williams said he was aware that some working franchisees were “a bit gun shy” but said they could request their submission was confidential and not published.
They could also give evidence to the inquiry in-camera with no record in Hansard.
He said there were stories of people going broke and committing suicide as a result.
“Things have got to change,” he said.
Submissions to the inquiry close on 4 May.
So far, just four have been received. Of those, one is from an academic and three from people involved with master franchises.
Elke Meyer, the former credit controller at retail food group, whose job it was to collect debts from franchisees, told the inquiry in a submission that she took note of what she considered “serious issues” during her tenure.
“The company’s motto was ‘cash is king’,” Meyer wrote in her submission. “My manager was very clear about this, despite my attempts at making her see it was creating a false economy as it was not sustainable long-term if the franchisees and staff were constantly unhappy and struggling.”
Meyer detailed a situation, which she has spoken about previously, where she raised concern that a struggling franchisee was a suicide risk.
“When I contacted the family a week later to see how they were going and to ensure someone had contacted them regarding support, the woman advised me someone had rung them, but only to get money from them.”
Meyer also raised concerns franchisees were enticed to buy businesses with rubbery figures.
“I spoke with franchisees daily who would tell me they believed they were lied to regarding the alleged profit the store they purchased was making prior to purchase. Many of them had not done their due diligence because they believed the company had credibility. Many of the franchisees had purchased company stores and there were allegations made that the profit/loss paperwork was altered prior to sale.”
Jim’s Group, the country’s largest franchise chain, made a submission to the inquiry and said the current franchising code of conduct did little to protect franchisees from unscrupulous operators.
“The whole system is no more than a feeding trough for lawyers,” the submission says.
“Even if a franchisor blatantly breaches the code, the legal system is so cumbersome and expensive that people with few financial resources cannot take them on.
“Thus, even positive aspects of the code, such as the requirement for two weeks’ delay after contracts have been delivered, and providing a list of current franchisees to the prospect, can be ignored. I have seen a disclosure document from a major franchisor where the phone number of each current franchisee was the office number. In another case, the franchisor routinely fails to return deposits.”
Jim’s Group suggested a star rating system for master franchises.
Former Brumby’s bakery CEO Michael Sherlock said franchising was in a poor state, and more transparency was needed.
