Bankers Cry Franchising Flawed

It’s turning ugly in Australian franchising when bank franchises close their doors and it has nothing to do with the global financial crisis.  Franchisees say the model is flawed and the parent Bank makes all the money while the community holds all the risk.

The investigation also revealed that 14 of the banks were basket cases, with negative equity, 32 had poor working capital and many relied on Bendigo & Adelaide Bank loans to stay alive. The Australian

Given that central to the problem are networks of community banks held in franchise agreements with Australia’s major banks the question is whether the Australian government will finally intervene to protect franchisees and their customers?   A common thread in the media from these franchisors is that the bank franchises offer little to their bottom line.  It does seem that they are standing back and waiting for the market to decide whether their franchise model is flawed and to hell with the consequences to these franchisees and the ‘mom and pop’ community investors.    

Peden claims Robe Community Bank has lost $699,000 over the first five years of the franchise while Bendigo made a gross profit of $683,000 from the operation over the same period.

Some have argued that the Australian government’s relationship with the big banks is somewhat different to the one portrayed by its PR machine.  They suggest while The Australian Cabinet regularly and publicly criticizes the big 4 banks; behind closed doors they can do no wrong.  So will the Australian government finally look at problems in franchising when the fallout hits Australian communities?  I doubt it.

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‘But up to 77 of the branches are running behind their business plan and, of those, six to eight are classified as being in "sick bay". There could be more, but the bank does not reveal this to the public.’