FCA Speaks on Australia's New Franchise Reforms
MELBOURNE, Australia — Former chairman of the Franchise Council of Australia, Stephen Giles, has been asked by Blue MauMau about the changes to Australia’s franchise laws that were announced on November 5 and what those changes mean.
Franchise attorney Stephen Giles is a director of the FCA, who leads the lobbying group’s industry regulation and government relations efforts. Based in Melbourne, Giles has been a past chairman of the FCA in 1998 and from 2000 - 2007.
BMM: After almost a year of deliberation, Dr. Craig Emerson, the federal parliament’s Minister overseeing small business legislation announced last week reforms to the existing franchise law. What are your thoughts on the new amendments?
Giles: The vast majority of people in the franchise sector support the changes as sensible improvements to a system that is fundamentally sound and in my view world's best practice. The attached summary of the Code changes is fairly comprehensive, and I think paints a fair picture of how the industry views the matter.
BMM: Do you think that Australia’s Competition and Consumer Commission will receive more resources to handle the amended franchise regulation, their expanded duties and new authority?
Giles: The regulatory framework in Australia is extremely comprehensive, and the ACCC a well resourced and active regulator. The existing broadly interpreted prohibition on misleading or deceptive conduct and the comprehensive Franchising Code requirements offer substantial protection for franchisees. Add to this the prohibition on unconscionable conduct and I think the regulatory framework strikes an excellent balance between the legitimate interests of franchisors and franchisees. These changes may useful improvements in the area of end of term disclosure and ACCC enforcement.
BMM: You used the term “unconscionable conduct.” What do you make of such terms and tools in Australia’s legislation language—terms like good faith? Some of our readers have written that the ambiguousness of such terms will just serve to complicate legal battles and reward lawyers. Others say that the concept of good faith is critical for meaningful reform.
Giles: In relation to "good faith," in my view this term was in essence a blind used by some to try and secure some sort of sweeping new right to anchor a claim for compensation at end of franchise term, or blanket compensation should a franchised business fail for whatever reason. Indeed, as one State politician put it to me, "if it is a franchise and it fails, it must be the franchisor's fault, as it is a franchise". Even in my observations of the arguments between franchisee and franchisor counsel in the US I have not heard anyone try that one on!
UPDATED (7:10pm EDT): The real point is that there is already an implied duty of good faith and fair dealing which the courts are able to, and frequently do, imply into contacts such as franchise agreements. This works well. So, for example, if a franchisor refuses to consent to a transfer of a franchise, even though it has the power, because the franchisor wants to open their own outlet there, a court would almost certainly say that was a breach of the implied duty of good faith. The current legal position gives the courts flexibility, a statutory duty will just create uncertainty.
I attach a detailed article I have written on good faith, as it is a hard concept to explain briefly.
| Attachment | Size |
|---|---|
| Legal update on Australia's franchising reforms.pdf | 84.54 KB |
| Good faith creates uncertainty, doesnt solve problems.pdf | 122.44 KB |
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I must chime in with RIchard. Mr. Giles is doing his job, and that is not to titlt the playing field.
ANY legislation is good, as it at least shines a light on the poor practices of the unscrupulous and alerts potential marks to the likes of the Steve Horns and Nixon Peabody sharks in the waters of franchising, and also the out and out hucksters that peddle worthless concepts tied to life altering financial obligations.
The fact that we are even discussing this is a good thing! As has been said by others much more intellegent than me, sunlight is the best disinfectant.
Good franchisors can be rewarded for their forthright practices, and bad franchisors can be brought to task. Of course, there also bad franchisees that failed in a system run by a good franchiso, as Ray noted in a previous blog post. If legislation were to address every line of a contract between private parties, this situation would also need to be addressed closely.
I for one do not want government agents with no skin in the game appending volumes of terms to a contract that I sign with someone else. That smacks of the odious "Card Check" legislative push to have a bought and paid for beaurocrat dictate employment contracts for people who, like franchisees, put their life savings on the line based on certain agreed terms between parivate parties, only to have someone with no experience in your business and having no stake in the outcome change the ground under your feet.
The concerns about good faith expressed by Mr. Giles are misplaced. The Ontario Franchise Act, or AWA, describes the good faith duty as entailing mutual obligations - franchisees have duties fair dealing, which includes duties of good faith and acting reasonable according to commercial standards.
Because there is an interdependence between the franchisor and franchisee, there are possibilities for opportunistic behavior by either party.
The typical franchise agreement is drafted in response to possible opportunistic behaviors by the franchisee. And I would argue that in many cases this "protection" given to the franchisor by their counsel is a double edged sword - it encourages the very behavior that it was meant to protect against. By acting as if all possible opportunistic behavior is possible by their franchisees, it makes it more likely that franchisees will react as if they ought to be opportunistic. If you continually act as if X might be a Y, don't be surprised if X turns out to be a Y.
There is no corresponding contractual mechanism to address the possible opportunistic behaviors by the franchisor, except for a duty of fair dealing.
By requiring a statutory duty of mutual fair dealings into a franchise legislation, we move past the myth that pre purchase disclosure is all that is needed. A statutory duty of mutual fair dealings should be the hallmark of any modern franchise legislation.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
First, there is the Lanham Act trademark requirement that a TM owner maintain control and supervision over the use of his marks by his licensees. Failure to accomplish that is called abandonment of the mark - total loss of rights.
Then there is the issue of regularity of business methods, products, services to enhance the prospects that the TM will be an effective source identifier - which is the role of a TM. Secondary meaning comes from a TM becoming so pervasively recognized by the public that just its trade dress tells everyone - think the Golden Arches. Secondary meaning is the platinum level of TM value, and having it makes protection of the mark and its allied identifiers much easier when poseurs come along to rip it off.
Only then do we get to the motive, born of bad experiences, to limit and control franchisee/licensee improper behavior. I have enjoyed the history of representing many franchisors in tough situations dealing with franchisee misconduct, so I see franchise issues more from both sides of the aisle than most attorneys. For every franchisor horror story, I can tell you a franchisee horror story. A percentage of every population segment will be bad, and that includes franchisors as well as franchisees - as well as southerners and northerners and every other group you can think of.
When I used to draft franchise agreements, one at a time 35 years ago, I would go section by section and try to think of how someone with ill will could try to get around every provision, and then tune it up to increase its flexibility of application. Nowadays, so much of franchise agreements is simply standard language that the opportunity for original thought is more limited. The worst franchise agreements I see today are so over worded that they fight with themselves internally, and that in itself is a defect in their defensibility. In one case, a federal judge in Anniston Alabama, looking at the franchise agreement of a client of mine, opined that "It is clear that this company prepared its franchise agreement to cover every possible base. But, like Marvelous Marvin Throneberry, it missed them all." The client had several years before bought a franchise agreement from a competent outside firm and then over time modified it internally without any consideration of how the amendments affected the total document. It was an abortion. Fortunately there were other theories - statutory - that allowed us to prevail.
I have recommended that every several years franchise companies get someone with no history with the company to take a fresh eyes look at their franchise agreement and make sugestions about how to tune it up qualitatively. I still strongly recommend that. I am involved in one matter presently in which the franchise agreement is incredibly overworded - so much so that any single mistake in closing a sale can void all the escape clauses you could ever think of. In this case, they made that mistake.
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
are dumped and ineffective laws evolve and it has been that way for more than 2,000 years.
Richard – ‘More laws are not going to make anything better.’
We are not talking about ‘more’ as much as ‘better’. Even my close friend Stephan Giles acknowledges there is a need to reform although she insists on a placebo to allow everyone to move on until the next inquiry. As Les pointed out; winners don’t want to change anything [although they strive for optimum efficiency through improved contracts and investments in political and court-room clout].
Law will never protect the foolish but we are talking about practices that should not continue to be ignored and practices that should be in some cases outlawed and in others at least subjected to greater transparency. Better law and regulation are only parts of producing a better franchising environment but they are important.
Anyone entering any franchise today who hasn’t performed extreme due diligence is a fool. Anyone already in any franchise that does not have an effective IndFA better do something about it or they are a fool. We attempt to educate people about due diligence and IndFAs because they are critical but they are not the only aspects of franchising that need to be addressed.
The introduction of ‘good faith’ in Australia is a distinct possibility. FCA argue 'why' but everyone else argues 'why not'. FCA will howl but Emerson needs something they can sell as an industry panacea. The fact is; franchisees who have been subjected to abusive practices and drained of their entire financial resources will continue to have no forum for remedy.
Industry experts, academics and politicians agree that there is a need for quick, affordable resolution of complaints. The industry reputation will continue to slide as social media continues to grow and as it stands today prospective investors will become wary because their first look at franchising allows them to understand that it is difficult to identify a good investment when any franchise investment can so easily change to suit the evolving or new franchisor.
Lets face it; much of what goes on in franchising is blatantly outrageous and yet franchisor protectionists will stand on ‘standard industry practices’ because, in fact, they are.
How many times have any of you spoken to someone who knows nothing about franchising and they are shocked at just some of the examples of abuse and have difficulty believing it happens and even more difficulty understanding that nothing much is done about it. They look at you and obviously consider you exaggerate or you are possibly inebriated.
The more things change; the more they stay the same.
After my experiences and some I have come across, abolutely nothing is being done to those that deliberately attempt to circumvent supposed laws, by manipulating existing franchisees and withholding facts and information totally relevant to an informed decision.
As an example....franchisees required to speak 'favourably' of the franchise to assist with franchise sales or they will be terminated!
Or those that terminate their franchise to put an end to the pain and constant suffering, and then continue to be hit with a legal sledgehammer courtesy of one sided confidentiality agreements and "threats" if they speak ill of the franchise?
Oh I hear the screams now....'this doesn't happen' - 'it is not within the interests of the franchisor', and is against the law.
Please I've heard it all before, seen it all before, and it is all a load of BS. It does happen, and is happening to the detriment of too many!
It is all done behind cloaks, robes, smoke and mirrors of a legal system well beyond the reach of the vast majority of people.
Franchising needs 'better' laws, but perhaps more importantly, they need better enforcement.Let me guess...Mr Giles and the FCA disagee?
The Government clearly turns a blind eye, so it's steady she goes for the industry
If the truth of the situation were known in Australia, franchise sales would fall significantly, but we can't have that can we?
good faith and fair dealing cases in which the positives and negatives of imposing duties on franchisors that were not specifically stated in the franchise agreements were examined. We also suffered through Congressional hearings on something that would have been called some wishy washy name, providing for statutory imposition of duties upon franchisors not stated in their agreements.
In the USA we - Congress and the courts - came to the conclusion that it is really bad economic and bad legal policy forr the government to impose upon any parties terms in their agreements that they never put in there themselves.
The arguments for the imposition of extraneous and unstated duties upon franchisors were the usual - unfair - one sided agreements - rogue franchisors.
Not all franchisors require such policing in order for the market for franchises to function in an economically rational manner. To me it's somewhat like outlawing guns because some folks use them for improper purposes - ridiculous per se.
In addition, there are at least as many dishonest franchisees as there are dishonest franchisors, and there ws no willingness to have extra duty levels put upon franchisees. For example, should franchisees be treated as trustees of funds they owe to their franchisors. As we see in the Dunkin Donuts situation today, DD is able to find many franchisees in its ranks who have so misused the relationship that DD can take their businesses away. Arguing against DD's methods does not negate the fact of franchisee cheating.
There is enough bad behavior to go around. There is also substantial advancement in the past few years in the ability of franchiees to defend their turf through the establishment of competently managed independent franchisee associations. If they choose not to do that, their franchisors are not to blame, and we don't need laws to do for people what they can jolly well do for themselves at reasonable expense.
Where franchisees do defend their turf, and where franchisees do obtain competent help in pre investment due diligence investigations, the reasons for the imposition of extraneous duties upon franchisors that are not written into their contracts simply do not exist.
Balanced relationships are available for those who want them, and there is no excuse for not doing that. More laws are not going to make anything better.
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
This is simply wrong. A proper balanced franchise relationship requires a well functioning IndFA, after all the franchise system is premised on the theory that your franchisees are local experts, people who in general are better at extending your brand than hired help. As a group, those experts have both value and information which cannot be effectively aggregated without an IndFA.
The current legal climate doesn't set forth the procedures and standards for allowing a group of franchisees to become the bargaining agent for franchisee network. We do not have a legal framework defines the proper limits of collective action.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Mr Solomon is right. I thought very seriously about whether I would bother acceding to the request to put my comments forward on this website, as in the past I have found it to be full of diatribe, insults and slander. But Don's request was polite, and his editing very professional. So I agreed. Then I see postings by Mr Borradale, and no doubt in due course by others. I was right the first time.
Is this statement below (pdf, p. 7) from Mr. Giles' document an accurate analysis?
So if a contract has a clause that cleverly negates that the franchisor has to act in good faith, then the franchisor won't be held accountable for not acting in good faith with their franchisee. The words in the agreement signed by both franchisor and franchisee hold supreme.
If that is so, Mr. Giles and the FCA make a strong case to my little brain that good faith for all intent and purposes will not be a useful legal tool for very long -- once franchisor lawyers negate it in franchise agreements.
Lawyers: did I miss something?
Bob: The short answer in the United States seems to be: Yes.
A longer answer would be to note that the courts (as noted most recently by Ron Garner in his BMM interview) are staffed with judges from a particular part of the political spectrum. That has resulted in a jurisprudential viewpoint which is amenable to the idea that "good faith" is merely one of the terms which may be negotiated upon by the parties. In particular, Scalia esposed this view prior to being appointed to the Supreme Court.
However--in the US the federal and state court systems operate independently of each other and some states are more receptive to the idea of good faith.
Finally, I would note that while opposing the imposition of a duty of good faith is something akin to drowning kittens and clubbing baby seals, the Scalia approach is not without merit.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
in the U.S.
Very interesting. Good faith, like love, is in the eye of the beholder.
Good faith, commercial standards of fair dealing, reasonable standards of fair dealing: I wonder how a judge could best know such industry and situation specific benchmarks? By listening to a bought for industry witness on his stand?
Or by acquiescing to what was acknowledged and agreed to in a contract?
I won't respond to Giles in the manner he so richly deserves and in the manner most in Australian franchising would refer to him.
His answer to your first question is a dishonest account of the situation. Readers only have to look to the bi-partisan revolt against not going far enough. Then look to all those active in franchising across Australia arguing that Emerson has not ultimately changed a bloody thing. Giles relies on an industry where most don’t have a clue about what the hell is happening with this proposed legislation.
His answer to the second question is again not anywhere close to the truth. The Committee of the Inquiry clearly found the ACCC to be ineffective and the transcripts of public hearings contradict his typical response.
The third answer! That is Giles at his best. He answered to one aspect of the implications to good faith and while common sense has to have concerns as to how a Court would find such an instance the implications of good faith are considerably broader.
The Committee asked why FCA and self-interested other from the franchise scam game would purport that implied good faith was good enough and why implicit good faith should be seen as a problem if they were agreeable to implied good faith. The silence was deafening.
And then later when they had the time to come up with spin for an answer Giles and his gang produced the dribble on good faith that once again ignores the realities of the fuller influence of good faith on conflict in franchising.
Stephen Giles [and Deacons] has more blood on his hands, by far, than any other in Australia. He and his gang manipulate the industry to fill their pockets and he is directly responsible for the ongoing imbalance and abuse and often, been directly responsible for representing some of the greatest franchisor rogues to destroy many lives as examples for others not to resist their 'destiny'. And he is still in control of the FCA whether the front is preferably believed by our politicians or not.
Remember this; Giles and Deacons and FCA win on default in franchise conflict because they only ever represent the the big money and usually make sure the little bloke is broke before he gets close to a Court. They don't want effective law as that would negatively effect their revenue from Australia's leading franchisor rogues.
And still we distract from the need for Tribunals to offer affordable access to justice. All of the Giles gang know that whatever is on the table is nothing if the big boys ensure the mum and dads cannot afford their case.
Two of the franchisees I have been speaking with recentIy have equally no-brainer cases with absolute evidence of breaches of contract, the TPA and the Code. They are from different systems. One will win because he can afford to win. The other was terminated for 'non-performance' and stripped of everything after the franchisor stole his clients.
The more things change; the more they stay the same.
Borradale writes:
Ray--with all due respect, you live in a representative democracy, and a capitalist one at that.
Mr. Giles is working for his clients, and making a good living at it. The reason his clients can keep paying his fees is because people keep buying franchises.
If those franchises being purchased are sold by "franchisor rogues" then those who are purchasing the franchises might want to rethink purchasing them in the future.
I witnessed the debate over federal legislation here in the US and can tell you that the franchisors were united--both economically and politically. On the other side, franchisees simply didn't care enough to contribute either time or money.
Classic collective action "free rider" problem, and I suspect you have the same scenario in Australia.
Now whose fault is that? Certainly not the fault of Mr. Giles.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
larger issue to be served this day on BMM. Don has to go to great lengths to get leaders of the franchisor position to post anything on BMM because they are treated to insult and name calling instead of a straight forward statement of disagreement on the merits.
What Mr Giles experienced here today was unfair, unjustified and uncivil. As much as I consider you to be a personal friend for whom I would vouch and go to bat, I wish you had taken a higher road today regarding Mr. Giles.
If Don can't get the franchisor perspective aired in here by the leaders of their position, this site will wither. BMM is, frankly speaking, more important to "the cause" than your need to vent today. Until today you were considered a leading light in here. You damaged your reputation a great deal, and I hope you say something to let everyone know that you sincerely regret what you said about Mr Giles in here.
I have upon occasion had to apoligize for my own intemperance. It is now your turn.
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard, if you had first hand involvement with the carnage he has been central to then you might have a different opinion of whether it was ‘unfair, unjustified and uncivil’. In saying that I do appreciate where you are coming from.
This is the Australian firm that perfected the art of smashing franchisees into submission with an avalanche of threats. Typically received at 5.00pm on a Friday and requiring legal advice virtually immediately. This is the man at the centre of the Franchising Committee’s slap on the wrist for breaching a federal law in that he and his client John O’Brien were caught attempting to intimidate a Poolwerx franchisee who dared to submit to the Inquiry.
Frankly, there is no apology for Giles. I have apologised to Don and agree that my ORIGINAL comments were not in line with what BMM is about. Anyone that has read my comments across this site could not suggest that my intentions are to undermine the message that franchising requires an education. It is not that difficult to cut the lies from the argument and my comments were unnecessary.
There is so much more I could say and while my first comments were out of line I stand by my second comments [now changed to hopefully be politically correct] and will continue to put truth first when that is what is needed.
Giles did ‘distort the truth’ to Don and BMM. That is fact.
The more things change; the more they stay the same.
Ray, the difficulty in going off against Mr. Giles is that no matter what your personal beliefs are, the tradition at BMM has always been to supply evidence and let others make of it what they will.
The fact that Mr. Giles had to rescind part of his letter to a franchisee because it impeded parliamentary function is important because it demonstrates a lack of legal judgment - most attorneys would not threaten someone with an action libel for making a privileged or attempting to make a privileged statement to a Parliament subcommittee, since privilege is a defence to libel. (The speed of which the retraction took place indicates that Mr. Giles immediately understood his previous lack of judgment.)
Mr. Giles was lacking in judgment when he wrote the letter and included the warning about a libel suit for a testimony protected by parliamentary privilege. Now perhaps Mr. Giles is not an expert in defamation law and was only a too enthusiastic supporter of his client. I have certainly made my fair share of errors in this department.
But what is the evidence, a part from this one instance, that Mr. Giles' firm "has perfected the art of smashing franchisees"?
It appears from this example that the franchisee was perfectly competent enough to smash back and get a letter of reprimand from the Parliamentary subcommittee directed to Mr. Giles and his law firm. And the subcommittee appears to have been satisfied with the firm's immediate response.
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Michael, I appreciate that providing supporting evidence achieves the result we all want and that is the norm. But in this instance I would suggest it is not preferred and I will explain why and how it could be provided shortly.
For a better result for BMM to satisfy concerns as to my original poorly considered vent I could suggest that someone at BMM might like to discuss Giles’ practices with the contacts I have sent you. None would agree with my outburst but all could give you another insight into Giles and Deacons.
In part I have to admit that Giles was central to the financial demise of my wife and I by Deacons where we lost everything. A substantial ‘everything’ that sees my wife now without her beautiful home and at 59 working in commercial cleaning.
A greater influence on my ‘uncivilized’ vent was that Deacons oversaw the demise of almost 190 Midas franchisees [many friends] while also working on Bakers Delight, Poolwerx, Howards World, Arnolds Ribs, Deli Delight and Lenards Chicken franchisees to name but a few of the most brutal franchise systems to benefit. Deacons represent over 20% of Australia’s franchisors [based on their website]. It was always the same strategy and that strategy explains why there are no Court records to share.
Now readers might consider whether there was at least some level of restraint in my original comment ... and in not joining Giles in that elevator in Melbourne.
Deacons are very good at directing traffic with franchisors and a lawyer friend once suggested that they deliberately inflame conflict as a means to ensure longer and greater revenue from sucker franchisors. I have been in the middle of Deacons’ victims for many years and in Australia their reputation is that there is no serious attempt to reconcile unless the franchisor sees a benefit. Deacons wage a psychological and financial war upon those who don’t know what they are in until they are screwed.
This has been lucrative for Deacons where the common link goes to extended and inflamed conflict, extreme abusive franchisor practices and a hell of a lot of disasters for franchisees. FCA franchisors report being sick of attending meetings and seminars that seem to purely target their cheque books as opposed to offering any real membership value.
I actually like the idea of an effective franchisor association to better the franchising environment just as I have pushed for an effective franchisees' association. But FCA does nothing for the industry and a hell of a lot for Deacons.
FCA operates as the marketing arm for Deacons where Giles corrals franchisors. Some because they are sold on Deacons by FCA [Giles] as ‘the best’ or because their operation needs representation that allows their scams to roll on under the ability of a Deacons’ strategy to shut down franchisees, break them and ensure Court is not an option once they eventually realize how deep they are in something they did not expect.
The only solution at BMM I see is for me to email out to my address book and request those with Deacons/Giles experience comment. But that would stink up BMM and remove what little focus there is left on the Australian issues that many franchisees here have been working on for many years.
If I were to send an email out I suspect we would see much more venom than my original post and that is exactly what Don, and all, do not want. I have received many calls this week updating me on what is being said at BMM and I have asked angry callers not to comment on Giles.
Bottom line; there is no evidence to point to but I could get those who have been touched by the man to vent some more. We don’t want that.
Don asked me to clean up my original post and I did. Most people missed it and don’t seem to understand what this is all about but they do know that Ms Giles lied at BMM and that is clear. I have to admit that I was happy that Ms Giles did not miss the original.
And by the way; the Giles and O’Brien intimidation of a witness to the Inquiry should indicate their level of arrogance in Australian franchising. They expect to get away with anything but they slipped up … once. Since then, the Poolwerx franchisee left the system with next to nothing and he has been gagged. Since then Poolwerx has continued on its merry way burning franchisees.
The real issue here is that the Giles’ interview was an outrageous distortion of the truth. What we all call ‘spin’. Each of his comments were clearly and easily shown to be bullsiht.
The majority of people in the Australian franchising sector do not agree that what Emerson has tabled will achieve a bloody thing and it seems that neither do most here at BMM. It is a good start but it has no finish and I would refer everyone to the blogs by Liz Spencer, Rupert Barkoff and Simon Young. And this; Emerson Fiddles While Franchisees Burn.
The more things change; the more they stay the same.
email on this coming your way.
The more things change; the more they stay the same.
There are many franchisees who would love to provide the evidence you seek of our opinions of Mr Giles's law firm however in Australia we have not the protection of a positive right to freedom of speech. There are plenty of other instances I know of first hand just from my time with the franchisor that Ray refers to with regards to parliamentary privelege that could help you to understand. Are we prepared to risk our investments, our homes and our livelihoods to explicitly endorse our opinions with the empirical evidence you claim to be standard? NO we are not. Therein lies the problem with the idea that market forces should simply force out poor franchisors. Only in franchsing can you purchase a product and be forever forbidden from telling other potential buyers how you found the product and also be given a financial incentive to be party to further misrepresentation of the product.
HOWEVER,
If one of you lawyers are willing to act ( or even are qualified in terms of your right to practice here) for free for the defense of franchisees who proffer such evidence should they be sued and forced to demonstrate the defence of truth in court, I'm sure you would be flooded with franchisees testimony to the effect that you seek.
Poolwerx franchise agreements now contain clasues to the effect that a breach will be applied and a franchisees right to renew is removed ( along with any rights to expand, employ staff or otherwise realise their investment during the term of the contract) should the franchisee bring negative opinion towards the franchisor. Now that is a loose and often abused clause right there.
Yet what Mr Giles did, in his error to threaten defamation against a parliamentary witness goes much further than the consequences upon th franchisee in question. This particular error in judgement did not just cost the franchisor a slap on the wrist from parliament but single handedly undermined the investment of every single Poolwerx franchisee in one fell swoop.
So i cannot make ANY error in judgement if i wish to protect my investment, but the franchisor who employs his high school buddy to run his legals for him can do more damage to the franchise than the rest of us franchisees could do put together without even seeing a court room.
I contend that the situation with Giles and the parliament matter has greater reaching consequences than those on the franchisee at the centre of this situation, to which i might add, the franchiseee is still suffering the consequences for.
On the point, the real point, among all these platitudes about what BMM is for, is that franchisees disagree with the FCA's postion on reform and that franchisees are not and do not wish to be represented by the FCA.
Giles states that "The vast majority of people in the franchise sector support the changes as sensible improvements to a system that is fundamentally sound and in my view world's best practice."
However the other articles posted on BMM by both industry professionals and franchisees would indicate otherwise. Simon Young claims the reforms in some instances go too far and in others not far enough. Professor Liz Spencer speculates on why the franchise industry are so afraid of an explicit good faith term if they accept ( and promote?) the implied good faith we already have.
On the subject of ACCC resources, the links that Ray has provided to the committe hearings should go some way to demonstrate the accc's position on funding and resources along with comments made by the ACCC in other cases for which it has jurisdiction. Petrol price and grocery price investigations spring to mind immediately aside from franchising.
I could also refer to the diabolical situtuation whereby the ACCC demonstrates a lack of resources when it comes to its role in deciding on third line forcing and in its inability to obtain contracts from franchisors or to seek information from franchisees concerned in order to investigate properly the truthfulness of the submissions from franchisors claiming imunity from the Trade practices act realting to this area.
On the subject of good faith and unconscionable conduct, the FCA has failed to argue the case that explicit provisions for good faith present a greater degree of uncertainty for the industry than the implicit provisions we already have under the TPA. To say it is a "blind" used by some but that the courts already rule in franchisee favour in certain instances under an already existing legal situation seems rather incongruous.
If some of you have things to say to an individual about their conduct on BMM and the principles you espouse that BMM stands for I would request that you "get a room" and not continue to deflect and distract from the issue of australian franchise reform that the rest of us would rather discuss.
As australians interested in debating the issues to hand, we resent this intrusion into our thread and the highjacking of it to hear you all argue on platitudes of conduct. To those of you, both australian and overseas that have something relevant to the subject to add, thankyou.
Boudica,
Excellent points.
May we focus on a very important point that Michael raises and you rightly highlight, please?: interference in the lawful activity of a parliamentary committee.This goes to the heart of how laws (including franchised ones) are made. Commonwealth countries have more similarities than do U.S.:Oz ones.
I speak from first-hand experience as a volunteer industry aide to Mr. Tony Martin who was a provincial member of parliament leading up to the enacting of our first franchise law, the Arthur Wishart Act (Franchise Disclosure), 2000. I was privy to the behind the scenes story of how the hearings were negotiated, who pushed themselves as a witness, what people said at dinner, etc. because I traveled and talked with Tony to the 4 Ontario ciites (this is me with a cow in Sault Ste. Marie, Tony's home town).
Evidence of Coercion:
1. Indirect Influence: Tony was a substitute member of the Legislative Assembly of Ontario's Standing Committee on Private Bills and Regulations that was entrusted with conducting meetings and the 4 days of public hearing in 2000. He received updated lists of Ontario citizens who contacted the Clerk of the committee; people that wanted to testify, naming names as it were. He shared those with me and we found it how often those names "volunteered" and then "unvolunteered", usually in mass. We heard, informally, that many were coerced not to testify. We chose not to raise this interference as an issue but Tony informed the Chair and Clerk of our findings.
2. Direct Libel Chill: Mr. Sterns is a, now, a partner with a very influential franchise law firm in Canada and was my family's personal lawyer (off-and-on) during my "troubles". I draw your attention to the opening of his Hansard testimony:
However, further in his testimony, the Acting Chair (Mr. George Smitherman) withdraws this legal protection:
No one knows for certain what any of the 40 witnesses' testimony could have been because of this fear of legal action by "someone".
Tony raises a red flag and the Chair agrees:
Tony went on on Day 4 of the hearings to call for an investigation of undue influence regarding the role of the Canadian Franchise Association and its executives. The legal professionals on Blue MauMau can explain the seriousness of this charge (or not, as is their right).
I know a great deal more of this intimidation matter but I have been sued twice for my franchisee advocacy activities. Using litigation as a means to bully parliament or deprieve duly elected officials of needed, unbiased citizen testimony is NOT common and is both unethical if done by an officer of a court and illegal.
I do not view this post as off topic in the least considering the timing and seriousness of these allegations.
- most attorneys would not threaten someone with an action libel for making a privileged or attempting to make a privileged statement to a Parliament subcommittee, since privilege is a defence to libel. ,
is that so: I know first hand of a franchisee who experienced just that. the solcitor sent a letter claimig that due to the fanchise agreement the fracnchisee must refrain from making submissions. (except they said defamation not libel).
Is there something that franchisee can or shoud do about that.
Defamation can be through either libel (written) or slander (verbal)
None-the-less it is a well known fact that franchisees have no recourse for a demonstrative or abusive franchisor (especially if they team up with a lawyer cut from the same cloth), unless they have sunstantial means to put it before the court
All the window dressing in the world from the likes of Mr Giles (yes the Code is comprehensive etc etc) but nothing is being done to address the fundamental issue that the law is beyond the reach of most people...simple!
This creates an obvious tactic adopted by many franchisors and lawyers in many cases of litigation....bleed them dry and keep it out of court!
If you address this issue, you drill to the core of what seems to be the primary allegation against Jim Penman. Low cost entry franchises are a catch 22. Jim clearly believes he can get away with anything he so desires because he knows most of his franchisees cannot afford to fight him.
"You could get more, but it will cost you over $50,000 in legal fees"
You really have a better and quicker outcome going red or black at the casino!!!
OK lawyers, how many times does the stronger party know they are in the wrong but just carry the other party a few rounds to make a point?
It is a simple but treacherous game when you know the rules! Three recent inquiries have clearly showed it, but Emerson and the FCA continue to ignore it!!!!
The changes and the Code mean nothing, unless it is before a court. Lose-lose for franchisees....win-win for franchisors
I wonder who Emerson seeks his advice on Franchising. Anwhere else other than the FCA?
People are hurting but nobody is really listening
but decided to amplify your insulting commentary. Your credibility in here has been tarnished by this. But if that good will with your friends is a price you are willing to pay for your intemperance, so be it.
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
but you don't know anyhting about Giles. You should all do some research before you defend Giles. The changes to Australian law will not stop the con men in franchising. Giles is behind many of the scams that have been brought on franchisees. Bmm is putting him up as someone worth hearing from when he is the bastard that would make sure it continues. I call that desperate and hypocritical. Good luck to you and your credibilitiy with Australian franchisees. Good luck to Australian franchisees. You are going to need it. It will now be luck only if people do not get franwhacked in Australia and their savings and health stolen. Australians who understand this whole crap fight better and know Giles will tell you all you are wrong. Good luck to you. Was Mengeles just doing his job well? Shame!
Just zap it if you regret it - been there done that
but it was some rediculous hour of the morning after a long night of training franchisees and there he was. Not what I needed to read and not what I needed to write.
The more things change; the more they stay the same.
While Ray's pending apology is appropriate it will not encourage franchisors or those who have a franchisor perspective to post on BMM.
Franchisors have nothing to gain from BMM in its current incarnation. There is little community interest in respectful dialog so why would a franchisor subject themselves to insult, rebuke and vitriol?
Frank the Franchisor
I have posted comments and had rather harsh comments made back, they make it sound like I am dumb, stupid, igrnorant etc etc. Suck it up mate. So It is not just the franchisors that get a beating on this. Just Becasue a majority of complaints are made by people that have lacked business experience before they enyteretd into an agreement, there is a perception that many franchisees only have themselves to blame, that is not always the case. This is a site where peoples opnions are let lose freely and when that happenes you will always get an emotional response. Many people like myself came accross it and have found a forum they can express the dissappointment in not only the frasnchiors but the governement who have put the laws in place and then do not enforce them. This inaction from the ACCC allows con men and a'holes es to pepper our system with dud franchisors. If a fracnhior has something good to say then let it out. take the responses and take your time to learn from others mistakes.
Having read comments on this site for some time, I have yet to hear a franchisor make any positive contribution to better franchising. Their comments usually begin with "its your fault (the franchisee) for _________ (fill in the blank: being incompetent, not having enough capital, signing on in the first place, etc.)"
Instead of trying to rid the system of false statements and scam franchisors, the franchisor community signs on to the site and does the typical blame game. There are too many failing franchisees (see ALL the government reports that have been discussed on this site) for this to be happening without a substantial amount of fault to be laid on the franchisors' feet.
Franchisors don't like this site because it informs franchisees and potential franchisees of the "whys" of system failures. Franchisors don't like this site because their only answer to the problems within franchising is: "tough luck, you signed the agreement, we own your ass(ets)".
If you want to truly discuss the issues and create real solutions we are all ears.
have made contributions to the betterment of franchising so I don't know how you could come to your conclusion -
"Having read comments on this site for some time, I have yet to hear a franchisor make any positive contribution to better franchising."
Maybe you and your attitude are the reason franchisors won't participate on BMM? Why should franchisors subject themselves to anonymous guest attacks and disinformation propaganda?
BMM posters regularly ask franchisors the indefensible logical fallacy "are you still beating your wife?"
Frank the Franchisor
The "some" you allude to are few and far between. Need we discuss revenue and expense disclosure, the contracting out of fraud claims and so many other issues brought to the fore on this and other sites?
Instead, we get regulations like those stated above where there are no teeth. Should we discuss the franchisors' opposition to the arbitration legislation now being proposed? The truth is in franchisors' deeds not words.
But why should franchisors care? They own the legislative process, are funded well enough to hire the best harlot lawyers that would screw their mothers over for a buck and have conveniently contracted out fraudulent activities.
Lastly, Frank, have you ever attempted to discern WHY so many franchisees attack franchisors? Have you really concerned yourself with the fact that everyone here, lawyers, franchisees and, yes, franchisor employees and franchise salespeople, all agree that most franchise systems do not work? Your own comment of how "some" franchisors have done some good things is proof. Yes, we all agree that "some" have. How about the other 70-80%? The above story is relevant to the U.S. because the same things happen here. Even the good franchisors are not vocal about weeding out the scams.
Are most franchisees unhappy? Show me the statistics buddy.
Frank the Franchisor
It is so unexpected that a franchisor would ask for statistics in an industry where franchisors work very hard to make sure that none are ever collected. So Frank would you provide us with the statisics on happy franchisees without complaint?
If you were to accept BMM conventional wisdom on franchising you could not help but conclude the entirety of franchising is just one big fraudulent conspiratorial enterprise that keeps expanding in franchisee unit points of distribution with the vast majority of these franchisees caught in a fraud vortex...a veritable money sucking continuum where franchisors get rich and franchisees get poor and are stuck in a vicious cycle of indentured servitude forced to open unit after money loosing unit as though it were one Dante's levels of hell.
This is the premise of fallacy that is BMM and the reason that it will never be relevant to franchising. Successful franchisees and franchisors have no use for BMM.
Frank the Franchisor
Not close and no cigar. Successful franchisees can learn from BMM as there are many tutorial blogs here that attract some great commentary. Even quality franchisors could pick up a tip or two from some of the experts that contribute healthy franchising and operational ideas.
Then there are those franchisors that know they have to check in and see if they have been hammered yet. Franky you are still here ... why?
The more things change; the more they stay the same.
The illogical ranting on this thread and the inability to make a cogent argument supported by empirical evidence should be an embarrassment to supporters of franchisees. Righteous indignation may get you a reality show on TV, but it doesn't sway the Judge.
Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400
BlueMauMau. BMM needs to have a forum for all views. Franchisors have views and those of us who are seriously involved in the franchising business - it is our living and we do very well at it - would like to have BMM be a serious professional level forum.
Unfortunately, loser bozos who can't get even in court/arbitration just want to vent, and they don't give a tinker's damn about whether BMM ever has value to the community at large.
That is selfish and shameful, and it makes you as bad as or worse than the people you curse.
I am rethinking my relationships with people who refuse to have respect for what Don is trying to accomplish here. If you care only for your loudmouth ranting, I see little reason to befriend any of you.
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Frank the Franchisor,
Don't forget that you are criticizing Ray the Australian Franchisor, who posts frequently here.
Now back to the topic at hand: do you think "good faith" and "conscionable" under the Australian law will make for better franchising?
I have my doubts.
Brian the Franchisor
These one line platitudes that are posted by a member over and over again are way off the topic of the article. They have been moved here.
The poster seems to purposefully be trying to disrupt a public dialog. Such attempts are in violation of our posting guidelines.
As an etiquette to the authors and reporters who post, comments should stay on the topic of their article. The article above is on Australia and its new franchise amendment, not about plain english franchise agreement requirements in the U.S. or Canada. Your comments have not been deleted, but they have been moved to a more appropriate forum.
Mr. Blue MauMau
Moderator
I take that criticism deseredly on the chin. I have apologised and you are right except some deserve to be exposed for what they are. I have extolled the virtues of many a franchisor and will continue to when it is appropriate. If you have read anything I have written I am a believer in quality franchising and all I want is for there to be muc, much less of the opposite.
The more things change; the more they stay the same.
I'm not sure I understand the reasoning behind this statement that a statutory law would create more uncertainty than not having it. Can someone explain?
I think the concern is that it creates a new legal paradigm that will be fleshed out by the Courts over a period of time - during that time there will be uncertainty as to the scope of the duty.
Although I do not accept this position, it is possible.
I do not agree that uncertainty would be created becuase the concept of "good faith" - although it cannot be defined in a neat package - is something that anyone can apply to a particular factual situation.
An implied duty of good faith is generally accepted as applying to Australian franchises and it is hard to see why a change to make this duty explicit would create further confusion.
Take particular notice of Melbourne where the challenges were laid down in a forum where no one could respond and yet where those in attendance were ready to climb over each other to ‘chat’ with Giles, FCA and the rest of his gang.
Later and during the distortions of truth were torn to pieces.
For those who are interested the speakers are worth reading but it isn’t the same as seeing the facial reactions of the Committee when someone was attempting to feed them bullsiht.
These are PDFs at an average of 600kb so not that large.
Melbourne
Sydney
Canberra
Brisbane
The more things change; the more they stay the same.
Mr Steinberg makes very good points and it is nice to see this go back to the topic.
There seems to be one issue in this talk of Emersons idea of reform that concerns me. Sometimes mentioned and sometimes not. How will franchisees take advantage of any law if their franchisor has made sure they cannot afford it?
One point about the less appreciated comments. If BMM had known anything about Mr Giles then BMM would have expected the emotion.
drama to yo mama.
This is supposed to be a serious business forum. We all have tough issues about one thing or another. Ranting accomplishes nothing and only makes things worse.
For my money, Mr BMM is being too tolerant, too PC. If he doesn't straighten this out with some real action, this will quickly become a site for whiners, and serious people will simply take BMM off their to do lists.
Ray thinks he has no obligation to make a serious public apology for his bad behavior toward Giles. He is wrong. If this were my site, his privileges in here would cease effective immediately and he could rehabilitate himself and then try to get back on with public apologies and promises.
Ray used to get a lot of respect - including mine. But if he thinks his emotions are more important than BMM, he has lost my respect, my support and my friendship.
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
The apology you seek ain't gunna happen in this flamin life time. I apologised to Don and if he wishes to shut me down then fine. I was wrong in this forum and I don't mind admitting it.
While I have been forced to break from the subject, and am prepared to do so, I will never ignore what you know nothing of.
Richard you know NOTHING about Giles and I have had an absolute gutful of being made out to be the bad guy for shooting my mouth off in a manner not appropriate to BMM but definatley appropriate in response to a man responsible for a hell of a lot of the crap that happens in franchising in this country.
In the context of this discussion you sound awful stupid when the facts about Giles line up. But because of this uproar I am not in a position to map him out [mostly my fault]. So until I am releaved of my access to BMM you can keep ranting but don't expect a response from me.
I will also apologise to every Australian franchisee for unintentionally taking the focus from the issues and the quality of the argument that opposes Giles' apparently acceptable mistruths and allowing equal belligerence and a huge dab of arrogance to use my screw up to undermine efforts to have the truth out.
Richard, If Giles was doing to the US what he has been doing to Australia you would have more knowledge and you would be hunting him instead of me. But you don't have a bloody clue. Don; your call ... at this point I'm more than fine with whatever.
Over the last 10 days I have travelled 7,500 klms and over the next week I will go close to twice that so it isn't that I'm not wanting to participate it is just that I'm busy, or I've been canned, so I suggest everyone get back on topic.
Richard; you have equalled my wrong but I still luvs ya. I know you have a hard time being wrong but thats a fact. And I think it disgraceful that you have particpated to assist Giles in distracting from the truth. Again, there will be no response to anything on this subject.
I'm off to work now and another drive and another flight but I'll check on y'all tonight.
The more things change; the more they stay the same.
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