No franchise law: New Zealand as a Tier 2 economy

February 2, 2009

greenacreslogo1Humans have evolved a large brain to help in our survival.

It does a very good job but sometimes  it get tricked up in seemingly simple differences.

One of these is the difference between the words rent and own.

  • You rent a franchise.
  • You own a non-franchised business.

Understand? You own no thing/nothing when you rent a logo. Don’t look for equity: It does not exist in franchising.

Modern franchise law defines two terms:

  1. A franchisee is the end consumer or licensee.
  2. A franchisor is the owner and any of his “associates” (sub-contractor, selling agent, etc.)

Franchise law defines what a franchisor is very widely and a franchisee very narrowly for a very good reason: franchisors will try to wiggle out of their responsibilities by pointing to someone else in the selling chain when it hits the fan.

They are as bi-polar as U.S. bankers: laissez-faire in good times, socialists in bad.

A recent New Zealand Herald article shows this:

Auckland, Feb 2 NZPA – An Auckland man charged with fraudulently obtaining $3.5 million from people he granted Green Acres sub-franchises to, has re-appeared in court.

Keith Lapham faced three fraud charges alleging he obtained money by deception from 172 people while he was a master franchisee for Green Acres from March to December 2007.

Lapham was remanded on bail to a pre-depositions hearing in April when he appeared in Auckland District Court today.

His lawyer Peter Davey said an extra two months was needed to examine more than 30,000 documents disclosed by the Serious Fraud Office.

Lapham was an independent contractor and the Green Acres company was not the subject of any investigation.

There are only two terms: franchisees and franchisors & their associates in any jurisdiction with a half-assed franchise-specific law. Can’t really fault the Herald:

New Zealand is a Tier 2 economy in refusing to pass a specific-franchise law.

This government inaction is called enabling consumer fraud.

Questions

  1. Is it any wonder that Mark Bryers, a lawyer, structured the Blue Chip fraud as a franchise?
  2. With lots of people like Mark Bryers, being attracted to franchising, what’s the probability that it’ll happen again?
  3. Is it reasonable for Kiwis to expect more backbone from their government than having Minister Dalziel making her announcements on franchise regulation from the franchisor-only trade shows?

In contrast to almost all of the G20 countries that have a franchise law, it must seem that it’s like shooting fish in a barrel in running a franchise scheme in New Zealand.

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