13/05/2010 - 00:00

Trust issues alarm franchise sector

13/05/2010 - 00:00

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LACK of preparation by franchisees, poor communication, complex business systems and a lack of trust are among the key findings of a recent study of the $130 billion franchising sector.

Trust issues alarm franchise sector

LACK of preparation by franchisees, poor communication, complex business systems and a lack of trust are among the key findings of a recent study of the $130 billion franchising sector.

The survey into the relationship between franchisors and franchisees was undertaken by Brisbane-based Griffith University’s Asia-Pacific Centre for Franchising Excellence, and was funded by the Australian Research Council and the Australian Competition and Consumer Commission.

ACCC deputy chairman Michael Schaper said the study, which found that 28 per cent of franchisees disagreed with the statement that their franchisor could be counted on to be honest in business dealings, highlighted a lack of open and honest communication in the franchising model.

But researchers, who sent questionnaires to 350 Australian franchisees to examine causes of conflict in franchise systems, found an inherent lack of preparation by franchisees entering the sector significantly contributed to the breakdown of working relationships.

“This lack of preparedness in taking on such a large investment leaves many franchisees disappointed because they have certain expectations that aren’t met, and they may not realise everything involved (in franchising),” lead researcher Professor Lorelle Frazer said.

“Issues of conflict then arise from this.”

Thirty-one per cent of franchisees surveyed indicated that communication within their franchising relationship was unsatisfactory while 30 per said they could not rely on franchisors to keep promises.

However the study indicated that many franchisees failed to make use of available dispute resolution and mediation provisions offered in the Franchising Code of Conduct.

As a result, disputes would often end up in court.

Osborne Park-based Joyce Corporation, owner of the Bedshed franchise, last month settled legal action by a group of disgruntled franchisees over marketing fund rebates and contract disclosure disputes.

Franchisees in Claremont, Morley and O’Connor were part of a group of 22 that launched a damages claim in the WA Supreme Court alleging that Bedshed did not properly manage an advertising fund.

The franchisees were also unhappy over the franchisor making supplier rebates.

Formal agreements are yet to be signed but Joyce chairman Dan Smetana said the resolution would provide a “new, more cohesive and transparent” franchise structure that will “enhance future relationships”.

Jim Penman, who according to WA Business News’ Book of Lists owns the state’s largest franchise group, Jim’s Mowing, is locked in a legal battle with discontented franchisees over contract issues.

The dispute is a result of unilateral fee increases and operating manual changes, which regional and divisional master franchisees claim are “rewriting the contracts”.

Franchise Alliance (WA) principal Geoff Langham said such legal cases demonstrate the importance of relationships and workplace culture.

“There is a huge emphasis on communication but trust is more important as franchisees will forgive slower or less communication if they trust the franchisor,” he said.

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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