Elizabeth Spencer

Introduction

Elizabeth Spencer — Wed, 27 Mar 2013 18:55:19 PDT

Extract
Modern franchising has proved to be a remarkably successful business model. Today franchised businesses operate in about two-thirds of the approximately 192 countries in the world, making a major economic contribution. An estimated US$2 trillion in revenue every year is generated worldwide through this business form, enough to equal the fourth largest GNP in the world and to create more than 20 million job opportunities.¹ McDonald’s Corporation has over more than 32,400 restaurants serving burgers and fries in more than 100 countries and in 2010 reported sales revenue of over US$24 billion (up almost 6 per cent). The operation of franchises impacts economic, social and political conditions,² and has for the past quarter century been on the increase worldwide.³

A global survey of relationship laws for franchising

Elizabeth Crawford Spencer — Wed, 27 Mar 2013 18:55:18 PDT

Extract:
Information about patterns of regulation globally help to inform a better understanding of commercial regulation and to identify the most promising approaches to regulating the sector. This paper surveys legislation impacting upon the conduct of and exit from franchise contracts, referred to as 'conduct' or 'relationship' legislation. This legislation regulating the performance of the relationship establishes the rules that govern the franchisor - franchisee interaction after the contract has been signed. It alters the rights of parties, 'to freely contract among themselves, setting ground rules on aspects of the relationship such as termination, non-renewal, rights of franchisees to form associations, purchasing requirements, transfer rights, and system expansion.'

The regulation of franchising in the new global economy

Elizabeth Crawford Spencer — Mon, 13 Jun 2011 23:38:59 PDT

This unique study surveys franchise-specific legislation worldwide as a starting point for a thorough examination and analysis the role of both private and public regulation of the sector in the context of current theoretical approaches to regulating contractual relationships. The book concludes that properly calibrated regulation can minimize inefficient allocations of power and risk and lead to maximum economic and social benefits by promoting the development of small business, enabling the growth of entrepreneurial skills, and facilitating economic well-being and independence among SMEs.

Consequences of the interaction of standard form and relational contracting in franchising

Elizabeth Spencer — Tue, 27 Jul 2010 19:37:56 PDT

'All for one and one for all': A survey of franchise trade associations' roles in the governance of the franchise relationship

Elizabeth Spencer — Tue, 27 Jul 2010 19:09:38 PDT

This article examines the roles of trade associations in the governance of the relationship between franchisor and franchisee (the franchise relationship). Governance as 'the exercise of authority; control' is carried out at many different 'layers' of interaction. According to current conceptions of regulation and governance, the role of trade associations becomes more pervasive. Based on data from several sources, including an in-depth survey of five franchise trade associations, this article provides an overview of franchise trade associations' membership, the benefits and services. It suggests ways in which associations impact governance of the franchisor-franchisee relationship at all layers of governance.

‘Charlatans and rogues’ or just another dysfunctional family? — Part 1

Elizabeth Spencer — Thu, 11 Feb 2010 14:41:01 PST

Extract:

A process of dispute resolution for franchising under the mandatory industry code, the Franchising Code of Conduct (the Code), has been in effect since October 1998. A mediation procedure outlined in Part 4 of the Code constitutes the centrepiece of this process. This mediation procedure is a great step forward from the days when there was no formally recognised mechanism for resolving disputes in franchising. There are ways, however, in which the process and procedures can serve the parties more comprehensively. This paper identifies some aspects of the nature of franchising that may be significant in the design of a dispute system to meet the needs of this unique business arrangement.

Franchising- A way to supersize a business?

Elizabeth Spencer — Thu, 11 Feb 2010 14:41:00 PST

Extract:

When you next visit your favourite McDonalds, Hungry Jacks or KFC - please ponder the complex legal and economic structures that lurk behind the colourful clowns and dearly-departed Southern USA gentlemen. Many of these places are franchises. Have you ever wondered why a Big Mac is fundamentally the same whether you purchase it in Parramatta or Cairns or why the stores look the same wherever you go? Perhaps you work for a franchise. It is worthwhile to understand what franchising is because for many of the activities we undertake every day - and I am not only talking about convenience food - we will be provided with goods and services by someone employed by a franchise. But not all the stores you think might be franchises have gone with that model.

‘Charlatans and rogues’ or just another dysfunctional family? — Part 2

Elizabeth Spencer — Thu, 11 Feb 2010 14:41:00 PST

Extract:

Here in Part 2, conflict management and dispute system design theory form the basis for an analysis of dispute procedure under Pt 4 of the Franchising Code of Conduct. The analysis indicates some ways in which the current dispute resolution process outlined in Pt 4 of the Code might better serve the participants in the process.

Lies and deception

Elizabeth Spencer et al. — Thu, 11 Feb 2010 14:40:59 PST

Extract:

Some people think lying is necessary . . . even a good thing. Do you agree? When was the last time you lied? Do you always notice when you are lying? What lie(s) have you told in the past week? Maybe you said something like, 'I love your new haircut' when you didn’t; or, 'It’s okay, it doesn’t matter that you spilled grape juice all down my new white shirt' when, actually, it was a gift from your girlfriend and she’s going to kill you. We all lie for different reasons and with different justifications; however few of us stop to think what a lie actually is.

Reconceiving the regulation of the franchise sector

Elizabeth Spencer — Wed, 26 Aug 2009 19:23:13 PDT

Extract:

The franchising sector contributes an estimated $90 billion per year (about 11%) to the Gross Domestic Product and employs over 600 000 people in Australia, a figure that between 2002 and 2004 increased by about fourteen percent and between 2004 and 2006 by about thirteen percent* Despite its importance to the national economy, there is little reliable evidence of the economic effectiveness of the operation of the sector. Franchising is portrayed by its trade association as a vehicle to transform inexperienced people into successful business owners, with higher success rates than for independent small business.

* See footnote¹ in the Introduction.

Conditions for effective disclosure in the regulation of franchising

Elizabeth Spencer — Wed, 26 Aug 2009 19:23:12 PDT

This paper outlines the use of disclosure in the regulation of the franchise sector in Australia, demonstrating that it does not meet conditions considered necessary for effective informational regulation. First, there is not enough reliable information to gauge the risks in informing the design of regulatory process and the choice of tools; second, the information in the disclosure document is not uniformly reliable, accessible and useable; and, third, a franchisee's ability to act on the information is limited because the franchise contract is not subject to negotiation and there are limited alternatives in the market. As potential solutions, this paper proposes that increased cooperation among and fuller representation of stakeholders, better information from dispute resolution processes, and registration of disclosure would improve the level of information about the sector generally. To ensure reliable, accessible and useable information, the information that is required to be disclosed should be identified by all stakeholders, with assurance that it is provided in an accessible, useable way. Finally, educational initiatives are needed to enhance franchisees' ability to act on the information. This paper also briefly surveys some other regulatory tools used in the regulation of franchising, but urges that these tools be selected as part of a democratic and participative regulatory process that accurately represents the interests of all stakeholders.

Effective disclosure in the regulation of franchising

Elizabeth C. Spencer — Wed, 26 Aug 2009 19:23:12 PDT

Executive Summary:
This paper outlines the use of disclosure in the regulation of the franchise sector in Australia, demonstrating that it does not meet conditions considered necessary for effective informational regulation. First, there is not enough reliable information to gauge the risks in informing the design of regulatory process and the choice of tools; second, the information in the disclosure document is not uniformly reliable, accessible and useable; and, third, a franchisee’s ability to act on the information is limited because the franchise contract is not subject to negotiation and there are limited alternatives in the market. As potential solutions, this paper proposes that increased cooperation among and fuller representation of stakeholders, better information from dispute resolution processes, and registration of disclosure would improve the level of information about the sector generally. To ensure reliable, accessible and useable information, the information that is required to be disclosed should be identified by all stakeholders, with assurance that it is provided in an accessible, useable way. Finally, educational initiatives are needed to enhance franchisees’ ability to act on the information. This paper also briefly surveys some other regulatory tools used in the regulation of franchising, but urges that these tools be selected as part of a democratic and participative regulatory process that accurately represents the interests of all stakeholders.

Balance of power, certainty and discretion in the franchise relationship: An analysis of contractual terms

Elizabeth C. Spencer — Wed, 26 Aug 2009 19:23:12 PDT

Executive Summary:
Balance of power is a factor in considerations of fairness in the formation of contracts and in Australia is an express factor in determining unconscionability in contract formation and performance. Certainty is essential to business confidence that underpins planning and investment. Certainty is also a factor in evaluating what parties have agreed to in making the contract. Discretion, if it is too wide, may no longer represent the true intentions of the parties, but may instead be an indication of other forces, including asymmetries in the power relationship. These issues are of particularly significance in franchising; redressing imbalance of power and ensuring certainty among the parties are among the stated goals of the regulation of the franchise sector in Australia. Previous analysis has demonstrated that the market interaction between franchisor and franchisee sets up a relationship that is characterized by imbalance of power and uncertainty for a franchisee. Further, it has been demonstrated that, in theory, the standard form and relational qualities of the franchise contract synergistically reinforce these conditions. This paper tests that theory by evaluating balance of power and uncertainty in the terms of franchise contracts. A sample of ten contractual terms from nineteen franchise contracts is analysed as follows: first, the purpose of each contract term is outlined and the interests of both a franchisor and a franchisee are explained with respect to each term; second, the results of the sample are discussed. The results show that contract terms indicate that greater power resides with a franchisor, while higher levels of uncertainty are experienced by franchisees. This section also discusses the allocation of discretion in franchise contracts. Discretion accorded to parties in contracting relationships can be both a measure of balance of power and certainty as well as a factor that reinforces these conditions. The results presented here also indicate that franchise contracts confer high levels of discretion upon a franchisor. Complacency about the ability of the sector to regulate itself through market and contractual mechanisms therefore should be guarded against.
Note: A companion paper discusses direct intervention, with a particular focus on the potential for disclosure to function effectively as a principal means of regulating the sector. (Please refer to ‘Effective Disclosure in the Regulation of Franchising’.)

The regulation of the franchise relationship in Australia :a contractual analysis

Elizabeth Spencer — Wed, 26 Aug 2009 19:23:11 PDT

This dissertation examines whether the regulation of the franchise sector is effective in achieving two of the stated goals of the Franchising Code of Conduct. These two goals are redressing the imbalance of power in the relationship and increasing levels of certainty for participants in the sector. Based on the ‘new learning’ in regulation, this dissertation takes an expansive approach to the concept of regulation. It considers how, in a ‘multi-layered system of governance’, the layers of regulation of the franchising sector contribute to these goals. The results of the analysis suggest that private, self-regulation through the layers of market and contract sets up a relationship where there is an imbalance of power in favour of a franchisor and uncertainty for a franchisee. The market interaction between the parties establishes these conditions, which are reinforced by the contract, in particular by the interaction of the standard form and relational qualities of the contract. A public layer of governance, direct intervention in the form of the Franchising Code of Conduct, relies largely on selfregulatory tools such as disclosure and is also ineffective in addressing the imbalance of power in the relationship and in increasing levels of certainty for franchisees. Because neither self-regulatory mechanisms nor legislative intervention achieves the stated goals of redressing imbalance of power and uncertainty in the franchise relationship, the analysis concludes that a reframing of regulation is necessary. The recommended revised regulatory program features collaborative, participative, democratic process to gather and assess good measurements that inform the identification of problems and the selection of tools appropriate to address those problems.