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Australia's Royal Commission Hits Banks and Franchisors

Australia is in the midst of a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. While the government rejected the need for the Royal Commission it became evident it would pay dearly in the upcoming election if one did not go ahead. Although the 'terms of reference' and a one year time frame were widely criticized, practices and cultures that have already been exposed at the half way point already ensure increased regulation. Now the Royal Commission has just begun to expose the brutality of the banks which will include collusion with franchisors to basically steal the lives of franchisees.

This is timely given there is another federal parliamentary inquiry into franchising underway..

The following are examples only of the media coverage that has been a daily event across all media since December 2017. The Franchise Council of Australia is silent. The government's reaction has been to make substantial cuts to the regulator's funding while fighting to deliver $17Billion in tax cuts for Australia's extremely profitable banks.. 

'Can of worms': Franchising in the royal commission's sights.

"Former Australian Competition and Consumer Commission chairman Allan Fels, who ran the worker compensation scheme at 7-Eleven and led a taskforce into exploitation of migrant workers, said the move by the royal commission would be significant.

"It will open a can of worms," he said."

Schoolteacher ‘misled’ by Bank of Queensland into $9000-a-month Wendy’s franchise disaster

"The revelations came after Suzanne Riches told of how she agreed to purchase two franchises, only for the bank to put her “between a rock and a hard place” by doubling her monthly interest payments once it was already too late to pull out of the contracts.

Giving evidence before the banking royal commission on Wednesday, Ms Riches said her company was forced into liquidation and she had to sell her property in the coastal town of Normanville after struggling to meet the nearly $9000-a-month repayments"

Banking royal commission: ANZ gave green light to franchise with 'clip-art' business plan

"A senior ANZ executive has admitted a $220,000 loan given to a couple for a gelato franchise was not done with the care and diligence expected of banks.

And Westpac has defended its decision to lend money to a Victorian woman and her business partner for a Pie Face franchise that quickly failed.

The banking royal commission has shifted its focus this week to small business lending, with concerns raised about the major banks’ willingness to lend to small businesspeople with sometimes problematic business plans."

Banking royal commission: Franchising, pre-filled loans in the spotlight

"To relieve mounting financial pressure, Messih told the commission she was forced to sell an investment property for $750,000, but she had hoped the sale would allow her to pay off her mortgages, as well as part of the business loan debt.

She said the bank had agreed to that arrangement, but the commission heard the day before settlement was due on the sale, Westpac called in the entire amount of the loan from Messih, despite her brother and sister-in-law owing half the amount. The property had been used as security for her portion of the loan."

Franchisees say they don't dare tell inquiry about problems

“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."

Submissions to the Parliamentary Inquiry into Franchising can be read HERE.

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About Ray J Borradale

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Area of Interest
Franchise Operations