Introducing Franchising Regulation

Abstract

The mandatory Franchising Code of Conduct was introduced in Australia in 1998 to regulate the franchising sector. This paper examines the effect of the Code on the sector and on franchising relationships in the 12 months following its implementation. A two-stage methodology was used in this research. Stage one involved a mail survey of the population of Australian franchisors and results were compared with an earlier survey of the sector. The findings indicate that following the introduction of the Code there were fewer substantial disputes, greater resolution of disputes through mediation than litigation, fewer franchise agreement terminations, fewer transfers of existing agreements, and both the rate of growth of franchisors and franchise units had slowed. The second stage of the research used a multiple case study approach to determine the effect of the Code on franchising relationships. It was found that the factors of trust, commitment, communication, power balance and mutual goals were important across the startup, conflict and interdependence phases of the relationship.