Franchise bankers are Always there for you (whoever you are)

friendIn August I wrote a post called Why Australia will get a McLaw.

WA Today ran a story this week by Chalpat Sonti called Franchising inquiry slammed as golden opportunity missed.

Perth-based Narelle Walter, a former franchisee who claims that an induced breach of contract left her out of pocket by $5 million, said the committee did not go far enough:

“Franchise renewals have not been addressed properly and I am distressed that the apportion of good will has not been determined,” she said.

“Franchisors can misuse this loophole in the franchising code and the (Trade Practices Act) to steal the assets of small business investors (through a process known as “churning”, when the franchise is on-sold by the franchisor to someone else).”

Interesting that Ms. Walter draws specific reference to franchise bankers co-operating closely with franchisors:

There was still a big incentive for banks to support the franchisor in the churning process, because they would rewrite loans with an [newer] “unsuspecting” franchisee, she said.

These allegations echo others, especially MP Jo Gash in my September post called Collusion allegation: AUS bank and franchisor.

I wrote about the very cozy franchise banker :: franchisor relationship in a paper to Industry Canada in 2005 called  Franchising Opportunism. It is also a good summary of how the Canadian and Australian franchise industry really works.

  • Feel free to download a pdf copy of Franchising Opportunism right here.

With friends like these bankers, investors do not need any enemies.

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