Franchise bruised reputation causing recruitment pain

The bruised reputation of the franchise industry is causing franchise chains big recruiting headaches in a slowing economy.

The industry’s peak body, the Franchise Council of Australia, is currently battling to promote the industry’s credibility on several fronts.

There are parliamentary inquiries into franchising in Western Australia and South Australia, and the Federal Government has now reportedly commissioned preliminary work in relation to the inclusion of a statutory concept of good faith as a specific statutory obligation in the mandatory franchising code.

According to a newsletter published by Deacons lawyers, the Rudd Government is examining whether such a concept would be capable of definition with legal certainty.

The diminished perception of franchising is making recruiting franchisees even harder, says Deacons. “Franchising generally is seen as a more risky investment than it was 12 months ago.”

Michael Sherlock, the former owner of Brumby’s Bakeries, agrees. “The going is a lot tougher with recruitment of franchisees therefore franchisors have to work harder to sell their product and represent it in a better light.”

Deacons writes that franchisor’s pitches will have to be more transparent about financial benefits of their franchise as an investment.

“Franchise systems therefore need to… show they are lower risk and providing greater levels of comfort concerning financial return… Explicit promotion of return on investment as an important mega-trend in franchisee recruitment, and one that will distinguish better franchise systems from the also-rans.”

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