Influence of the franchising code of conduct on the franchisor-franchisee relationship

Abstract

The Australian government introduced the first mandatory Code of Conduct as part of the Trade Practices Act (1974) to regulate its franchising sector in July 1998. In this research fifteen interviews were conducted to obtain feedback from franchising participants regarding their views on the influence of the Franchising Code of Conduct (the Code) on the franchisor-franchisee relationship. It was found that although many of the interviewees thought the Code was ambiguous in many areas, as well as being costly and time-consuming to comply, they were generally supportive of the new legislation. In general, interviewees felt that through its numerous requirements, the Code was able to increase the level of trust and commitment between franchisors and franchisees at the beginning of the relationship. The Code was thought to be most beneficial when conflict occurred because it helps facilitate communication and provides a balance of power between franchisors and franchisees. However, it was revealed that the Code had the least amount of impact on the termination/renewal phase because most interviewees had not experienced the situation to be able to comment on it.