7-Eleven and its franchisees have been granted conditional interim authorisation to discuss potential temporary store closures or reduced trading hours in light of reduced customer demand because of COVID-19 restrictions.

7-Eleven owns and operates stores in competition with its franchisees in some areas and therefore discussions and agreements between them risk breaching the competition laws.

“We recognise that 7-Eleven and its franchisees are facing difficult trading conditions due to the COVID-19 pandemic, and believe this co-operation could help the network and individual stores to remain viable,” ACCC Chair Rod Sims said.

“Importantly, franchisees are not required to temporarily close or reduce their store hours if they do not wish to. Our decision to grant interim authorisation does not force franchisees to agree to the terms offered by 7-Eleven.”

Franchisees that agree to close temporarily will receive an ex-gratia payment from 7-Eleven to cover certain unavoidable operational costs. For franchisees that agree to reduce their hours, the minimum guaranteed income that the franchisee receives from 7-Eleven would be pro-rata adjusted to reflect the temporary reduction in trading hours.

“Franchisees are strongly encouraged to seek independent legal and financial advice when considering whether to adopt these temporary measures,” Mr Sims said.

Interim authorisation is subject to a condition that requires 7-Eleven to notify the ACCC of arrangements reached with franchisees to provide some ACCC oversight.

“We are going to closely monitor the effect of these arrangements and when it is appropriate for this authorisation to be revoked,” Mr Sims said.

Having granted interim authorisation for the arrangements, the ACCC will seek feedback on 7-Eleven’s application for authorisation. 

Details on how to make a submission and more information, including the ACCC’s interim authorisation decision, is available at 7-Eleven Stores Pty Limited.

Background

Authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010.

The Franchising Code of Conduct will continue to apply to franchisees that operate non-fuel stores and the Oil Code will continue to apply to franchisees that operate fuel stores. Both codes contain a dispute resolution process.

Dispute resolution services are provided by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO). More about resolving franchising disputes and oil code dispute resolution is available on the ACCC website.

Section 91 of the Act allows the ACCC to grant interim authorisation when it considers it is appropriate. This allows the parties to engage in the proposed conduct while the ACCC is considering the merits of the substantive application.

Bob Jane Corporation Pty Ltd (Bob Jane) has given the ACCC a court-enforceable undertaking to comply with its obligations under the Franchising Code of Conduct in relation to renewal and extension of franchising agreements.

The ACCC was concerned that Bob Jane failed to comply with its obligations under the Code relating to end of term and renewal of agreements. In particular, Bob Jane failed to notify some franchisees whether it intended to renew or extend their franchise agreements at least six months before the expiry of their agreements.

The ACCC was also concerned that it extended the term of certain franchise agreements without first providing required documentation to franchisees and obtaining a written statement that the franchisees had received, read and had an opportunity to understand certain documentation.

“Under the Franchising Code, franchisors must notify franchisees in writing whether they intend to extend or renew the agreement prior to the expiry of the agreement,” ACCC Deputy Chair Mick Keogh said.

“This is an important obligation as it allows franchisees to make informed decisions about the future direction of their business.”

“Franchisors must ensure they comply with their obligations under the Code. We took this action because we were concerned that Bob Jane failed to meet a number of its obligations,” Mr Keogh said.

Bob Jane has acknowledged that its conduct was likely to have contravened the Franchising Code of Conduct and section 51ACB of the Competition and Consumer Act 2010. 

As part of the undertaking, Bob Jane has agreed not to terminate any franchise agreements operating under interim arrangements without providing six months’ written notice.

As required by the Code, it will also obtain written notice from franchisees that they have received, read and had a reasonable opportunity to understand disclosure documents and the Code before entering into, renewing, transferring or extending the term or scope of franchise agreements.

Bob Jane has also undertaken to implement and maintain a compliance program for three years.

“Ensuring small businesses receive the protections of competition and consumer laws, with a focus on the Franchising Code, is a current compliance and enforcement priority for the ACCC,” Mr Keogh said. 

“Franchisors often have a stronger bargaining position in their dealings with franchisees, and we will continue to investigate and take action against franchisors where we believe there has been a potential breach of the Code.”

A copy of the undertaking can be found at Bob Jane Corporation Pty Ltd.

Background

Bob Jane, trading as Bob Jane T-Marts, operates a national network of franchised and company-owned tyre retail stores supplying tyres for a wide range of vehicles, and tyre and car maintenance-related services.

The Franchising Code of Conduct is a mandatory industry code across Australia that regulates the conduct of franchising participants towards each other. The ACCC regulates the Code and investigates alleged breaches.

In 2019, a Franchising Taskforce was established to provide advice to the Government to inform the Government’s response to the recommendations made to the Parliamentary Joint Committee Inquiry into franchising. 

On 11 November 2019, the Taskforce released a Consultation Regulation Impact Statement (RIS) for public consultation setting out identified problems with the franchising sector and possible options for government action.

The ACCC’s submission outlines the ACCC’s view that serious consideration should be given to a different regulatory model to address the fundamental concerns that persist in the franchising sector, rather than the incremental changes to the Code currently being considered by the Franchising Taskforce.

The ACCC’s submission in response the RIS can be found on the Department of Industry, Science, Energy and Resources website.

More information for the franchising sector can be found on the ACCC’s website.