A legal battle over a fast food chain’s right to operate in Australia has reached the highest level of the Federal Court.
Key points:The Federal Court has agreed to hear a legal challenge to franchise lawThe decision by the High Court could have far-reaching implications for fast food restaurants in AustraliaIt could also have implications for Australia’s $1.5 trillion fast food industryThe Supreme Court ruled that fast food operators in Australia had a legal right to franchise under the franchise law they passed in the mid-1980s, effectively outlawing their competitors.
The court heard that franchise laws in the states of Victoria and New South Wales had been designed to allow businesses to retain control over their franchised franchisees, and in doing so, had been “unnecessary, unauthorised and unbalanced”.
However, the High Street law passed in Victoria in the late 1980s did not specifically allow for franchising, which meant that franchises could be bought and sold by a third party, such as a franchisee, for the sole purpose of continuing the franchise’s operations.
The High Court was asked to rule on whether this allowed the establishment of a franchised fast food business.
“The law that we are going to hear in this case, if it is ultimately upheld, will impact not just on the operation of the franchise, but also on the franchisees’ ability to compete for customers,” Federal Court lawyer Anthony Giddings told reporters.
“We will be looking at the fact that franchising is an essential component of the operation, and the franchisee is able to make money, and that is the fundamental issue that is before us.”
He said the High Floor law had been an “extraordinary piece of legislation”.
“It has been an extraordinary piece of statutory legislation and is an extraordinary tool for the regulation of franchised businesses,” he said.
“In some respects, the franchise and the franchiser are not really competing with each other, they are not actually competing for customers.”
And so if the law is upheld, that is a huge opportunity for the franchise to grow.
“He urged the court to reject the High Footfall law and instead set out an alternative “comprehensive franchise” law, which he said would provide “the broadest, strongest, most flexible and efficient” franchise regime in Australia.’
It’s not worth the cost’The High Street franchise laws had been passed in New South Australia and Victoria, and were then followed by legislation in the Northern Territory and Tasmania.
The Federal Government said the laws were passed to protect franchisees from competition from other businesses.
The law “was intended to provide franchised services to individuals who wish to own and operate their own businesses, but the law has had a profound effect on franchised franchised retail business models, as the vast majority of businesses in the fast food sector have gone bankrupt,” a spokesperson for Attorney-General George Brandis said.
He said a challenge was “very much on the cards” for the High Courts to rule against the laws.”
As a matter of principle, the Government would never permit the introduction of any legislation that would prevent franchised business models in Australia,” the spokesperson said.
A spokeswoman for the Federal Government’s consumer affairs spokesman, Tim Fischer, said the court had the power to make “very significant decisions” about franchise laws.
He called the High-Court ruling “unusual” and said the Government was “pleased” with the court’s decision.”
Our laws protect franchised food businesses from unfair competition from private companies, and have been successful in protecting franchisees and their customers,” he told ABC News.”
This is the most significant case that has come before the High Level Court and we welcome that outcome.””
Our role in the law at the time was to protect the interests of the franchised service provider, and to ensure that they had the ability to retain and operate the franchisable franchise in a manner that would best serve their customers.
This is an important victory for franchised restaurants in Victoria and the wider Australian fast food economy.
“But the Government will continue to review franchise laws to ensure they protect the franchise as it has the power and the responsibility to do so.”
Fast food chain McDonald’s, which is in the lead in Australia, has argued that the franchise laws were not intended to protect franchisors from competition.
In response, the Victorian Attorney-Genial, Robert Hall, has written to the Federal Attorney-Generals office and the Federal Department of Industry and Innovation, saying the franchising laws “were not intended as a protection for the franchisor”.
He said it was the franchisers’ job to “make a profit” and he believed they were entitled to “keep control of their franchising”.
“These laws were designed as a safeguard to protect consumers from unfair competitors who want to control their franchisees.”
They are not intended for franchisorship to protect competitors from unfair pricing