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Pizza giant Domino’s makes history as the first franchisor to pay penalties for alleged Franchising Code breach
Domino’s Pizza is the first company to pay penalties (totalling $18,000) for alleged non-compliance with the Franchising Code of Conduct.
Following the issue of two infringement notices by the ACCC, Domino’s has paid penalties totalling $18,000. The ACCC issued the infringement notices because it believed that Domino’s had failed to comply with the requirement in the Franchising Code of Conduct to provide franchisees with both an annual marketing fund financial statement and an auditor’s report within the time limits prescribed under the Code.
“These are the first penalties for non-compliance with the Franchising Code,” ACCC Deputy Chair Dr Michael Schaper said.
“Marketing fund contributions are often a significant expense and franchisors need to provide timely and accurate disclosure of the fund’s activities.”
“Ensuring small businesses receive the protection of industry codes is an enforcement priority for the ACCC,” Dr Schaper said.
If franchisees are required to contribute to a marketing fund, the Code requires a franchisor to prepare an annual financial statement to franchisees, disclosing the fund’s receipts and expenses, and to give a copy of the financial statement to franchisees by no later than four months after the end of the financial year.
The Code also requires the fund to be audited (unless 75 per cent of franchisees agree the franchisor does not have to comply with this requirement) and for the auditor’s report to be provided to franchisees within 30 days of the report being prepared.
Domino’s confirmed to the ACCC that it had provided the 2015-16 marketing fund financial statement and auditor’s report to its franchisees in late February 2017, which for both documents was outside the timeframes prescribed by the Code.
A Domino’s spokesperson said in a statement:
“Domino’s AdFund was independently audited in 2016, which confirmed all expenditure was appropriate and meeting the requirements of the Franchising Code of Conduct.
“However we accept we did not provide a copy of this audit report on time to our franchisees, or the required financial statements in previous years – this was an oversight.
“Domino’s apologises to our franchisees for this honest mistake, and will ensure an annual audit report and financial statement are distributed to franchisees as required by the Code each year going forward.”
The ACCC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain requirements of the Franchising Code. The payment of a penalty specified in an infringement notice is not an admission of a contravention of the Code.
On 1 January 2015, the Franchising Code of Conduct was updated to introduce court-imposed civil penalties for non-compliance with certain provisions of the Code, including those provisions requiring franchisors to provide franchisees with copies of marketing fund statements and reports.
The ACCC can also issue infringement notices in respect of alleged breaches of these provisions. The current amount for each infringement notice for an alleged breach of the Franchising Code is fixed at $9000 for a body corporate.
Further information https://www.accc.gov.au/business/industry-codes/franchising-code-of-conduct
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