Franchisors are becoming increasingly frustrated by the additional red tape created by the new disclosure laws that came into effect on last Monday.
“It has been discussed and it is an emerging issue,” says Steve Wright, the chief executive of the industry’s peak body, the Franchise Council of Australia.
One of the problems emerging is that the new disclosure requirements expose retail franchisors to having to proceed with a lease and open a company-owned store if the franchisee gets cold feet at the last minute.
Mark Langford, chief executive of franchised game retailer Gametraders, says many franchisors enter the store lease on behalf of the franchisee and under the new laws this must be completed before the franchise agreement is provided to the franchisee.
Under the new laws the franchisee cannot sign for 14 days and then there is a seven day cooling off period. This leaves the franchisor exposed for 21 days during which time the franchisee could walk away from the deal, leaving the franchisor with an empty store.
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