Franchising fallout as shares dive and report comes in for criticism

The fallout continues from parliament’s inquiry into franchising with Retail Food Group's shares diving as the sector goes into damage control.

However the report, released on Thursday, could have gone further according to some experts.

Mary Aldred, CEO of Franchise Council of Australia.Credit:Arsineh Houspian

Pitcher Partners principal of mergers and acquisitions Simon Johnson said the recommendations didn't go far enough in terms of disclosure documents and penalties for the franchising sector.

He said disclosure documents needed to be vetted by an independent party similar to an investment prospectus under the Corporations Act to ensure quality and rigor.

"Many of these people are unsophisticated and they are spending a lot of money on a franchise so they need to know the information is right," he said.

Senators Deborah O’Neill and Michael Sukkar listen as Tony Alford, former chief executive of Retail Food Group, appears before the parliamentary inquiry into franchising. Credit:Alex Ellinghausen

These criticisms included that the FCA "influenced the development of the current regulatory arrangements to benefit the interests of franchisors and potentially to the detriment of franchisees".

Chief executive Mary Aldred said the FCA is taking the parliamentary report "extremely seriously".

"A lot of our members, their feedback to me is where there are allegations of wrongdoing by a particular brand that reflects very poorly on everyone else in the sector," she said.

"I did raise [at the conference] that there had been criticism of the FCA due to an insufficient level of franchisee engagement and reminded them that we had already established a franchisee advisory committee."

Retail Food Group, which came in for sustained criticism in the report, also continued to feel the impact of the inquiry with its shares plunging a further 10.8 per cent to close at 16 cents on Friday.

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