Mandatory Industry Code in the Franchising Industry - Essay Example

Name of student Name of professor Course Date Introduction The franchising has been experiencing tremendous changes that have marked many steps to its stabilization. The most notable development in the industry is the creation of the right rules and laws that can control most of the issue that affect the market in the recent past. It is appropriate to argue in a way that will create an understanding of the parties that take part in the process i.e. the franchisor and the franchisee. The industry is growing wider and far given that there are several ways through which the mandatory code of conduct is managing the entire industry (Antia, Zheng and Frazier 577-589). However, some issues still continue to face the sector despite the long strides it is taking. The introduction of the mandatory code is the only remedy to the many issues affecting the franchising industry. Mandatory Industry Code The Mandatory Industry Code is the new regulation that regulates the franchising industry and any other activities that affect the consumer and competition Act. It is the most important code of conduct as it defines the relationship between the franchisor and the franchisee. It is a regulation act that is enforced by the Australian federal government through the Trade Practice Act in the country (Antia, Zheng and Frazier 577-589). The mandatory code of conduct applies the increasing disclosure information as it is impacting the ACC and the regulation systems. The system helps the ACC in the process of applying penalties and impingement notices to non-conforming companies to the consumer protection. History of the Mandatory Industry Code The initial stage of the production code was self-regulatory. It later changed to the voluntary regulation. In the current past due to the introduction of the disclosure system, it has now the mandatory franchising code of conduct. Franchising is an authoritative relationship. Franchisors and franchisees work together to offer products or administrations to shoppers in a steady way. It is vital that each store appears to be identical, as this gives the consistency buyers request(Antia, Zheng and Frazier 577-589). Exchange marks must be utilized as a part of the same way, the scope of merchandise or administrations need to be the same, the client must feel part of a comprehensive system. Through franchising, this consistency can be refined, and all gatherings can accomplish the obtaining economies, what's more, different efficiencies not accessible to small organizations. The foundation of the franchise relationship is the establishment agreements. Essentially with regards to the proposed changes to the shopper laws, the terms of the franchise agreement are by need standard structure. This is fundamental to guarantee consistency over an establishment system. A revision to augment the meaning of customer to envelop business-to-business exchanges will catch many establishment understandings. If this happens, the establishment division will be tossed into turmoil, setting at danger the significant monetary commitment the group makes to the Australian economy(Doni 223-242). The change will make a copy governmental administration in a way that will make gigantic instability and unnecessary cost and debilitate the structure of franchising. The franchise relationship is as of now subject to particular and thorough direction. The exposure procedure contained in the Franchising Code of Conduct gives the necessary system to guarantee that franchisees settle on an educated choice to go into a franchise agreement. It ensures that franchisees get broad data, have adequate time to decide on a considered choice, have entry to different wellsprings of data what's more, and can take master guidance. The Code procedure is supplemented by the restriction on unconscionable behavior contained in Section.51AC of the Trade Practices Act and in fact the general limit on deceiving or tricky behavior provided in Section.52 of the Trade Practice Act(Doni 223-242). The administrative structure is administered by the Australian Competition and consumer Commission and works successfully. How mandatory code of conduct influence franchise industry The franchise industry is one of the most sensitive sectors of the market. The different codes of conduct of the industry have different impacts on the way the various activities take place in the industry in the long run. The laws are vital in the development of the right environment in the market that the franchises are operation in the first place. The utilization of the proper code of conduct in the franchise industry helps in the maintenance of the right atmosphere in the process of trading (Doni 223-242). It is possible to have the right prices due to the impact of price fixing in the society. The underlying truth is the good prices will be in place and the process of equitable profitability will be possible in the long run. The inability of the franchisee and franchisor to be in terms is a good way to know that the transactions will be possible due to the presence of the right conditions in the long run. It is feasible to have the right developments in the industry because specific laws bind the two parties in the long term. The reliability of the legislation in the Australian continent is paramount, and it is the reason why the process of trading is stabilizing day in day out in the best way possible. The mandatory code of conduct in the franchise industry is the only solution to the elimination of fraud in the different transactions that impact the markets. The inability of the franchisor or franchisee to take advantage of the other party is an element that has been possible due to the presence of the mandatory franchise codes of conduct. The point is that there is a lot if trust in the process of the transaction (Thach et al. 138-158). In as much as there are laws that govern the franchise industry, it is possible to understand that the process of trading is easy and possible since the rules will make the parties remain loyal to each other. The process of exchange is only possible because no party will frustrate the other through fraud activities. The signing of documents fourteen days before the real transaction is a plan that helps in the stimulation of trade in the franchise industry. There is a stimulation of business in the franchise industry due to the surety of terms that occur between the franchisor and the franchisee. It has been possible to increase the volume of trade through the utilization of the mandatory codes of conduct in the franchise industry. It is essential to know that any business that lacks the right laws and rules to regulate its process it will be impossible to prosper in any given aspect in the long run. It is good to note that the reliability of the society to the franchising industry is only possible through the utilization of the right laws in place (Park and Jang 257-265). The codes of conduct act as principles that direct the way transaction takes place in the industry. The discretion of the rights of both parties in the transactions helps in the launching of any claim that may raise the process of defining the way forward in the development of the society in the long run about trade terms. The only way through which the mandatory code of conduct will have the right impact is through the careful utilization of the available laws that are directing every activity in the industry. It is only possible through the use of the proper processes of documentation and idealization of the right procedures that can yield results in the process (Doni 223-242). The viability of the different methods due to the regulations makes it easy to define the health environment of the franchising industry. The main point is that there is a way that the parties can communicate without any conflict. How the code of conduct regulates It is through the enforcement of different regulations that the mandatory code of conduct works. The mandatory code of conduct is one of the right ways through which the transactions in the franchise industry get to have regulations. It works through several ways that ensure there are transparency and openness in the process. The first way through which the code of conduct regulates is through the creation of the proper faith in the industry. The point in the good faith is that any of the two parties can respect the actions of each other so long as they are aiming at creating a process to the completion of the transaction between them. However, the application of good faith is limited to the individual legitimate commercial ambitions (Weaver, Grace and Jones 425-437). The other way through which the codes of conduct work is through the manipulation of both parties in the process of the decisions of the franchiser and the franchisee in the case of a conflict. The problem that may arise in the course of the transaction is solvable due to the existence of the codes of conduct. The underlying codes of conduct that regulate the franchising industry work in a way that it is possible to know the right way to solve any conflict that may arise in the process of the transaction. The law can initiate its services as an arbitrator due to the different avenues that the mandatory code of conduct provides. It is due to the provision of documented agreement that it becomes possible to impose penalties on the company or individuals who become unscrupulous in the franchising industry (Weaver, Grace and Jones 425-437). The laws can offer the best legal environment for the transaction in the most appropriate way possible. The industry remains regulated under all circumstances as a way to protect the key players in the process. The challenges the mandatory code of conduct of franchise faces and suggestions Issues arise in franchise regulation due to the fact it is not all the time when the parties will be able to transact without colliding in the process. The issues that are evident in the transaction are due to the over utilization of the laws that regulate the industry in most cases. It is not possible to operate in any industry without some challenges arising in the environment. The ability of the industry to set some rules to govern some activities at times leads to the development of unwanted issue in the process (Zakaria, Garanča and Sobeih 227-241). It is all about the creation of the right environment that will allow the use of the best litigation measures. The plans may, therefore, end up limiting the way the industry can perfect its activities. At times, it will be appropriate if the codes were absent due to the challenges they implicate to the franchises and the franchise. The first problem that has been evident in the utilization of the mandatory codes of conduct in regulating the franchise industry is the Over-disclosure of the two parties. The presentation of vital documents several days before the real transactions may predispose any of the two sides into some controversial situations (Doni 223-242). The opponent may utilize the available data to harm the other party even without their knowledge. It is a challenge that is affecting the industry in a paramount way as it is possible to know the right way to track the information of the transaction through other means. There is a need to look for a way to reduce the number of days before the sale for even two days are enough for the verification of the documents of either of the parties. The Red tape is another problem that affects the franchising industry due to the overuse of regulations (Zakaria, Garanča and Sobeih 227-241). The issue of over utilization of power in business is an element that limits the openness and ability to transact without causing any alarm to each other. It is a problem that will end up creating great issues in the way transactions take place in the long run. The inability of the key players to operate outside the rule of law makes things more official and hence deterring the small investors from indulging into the industry in fear of huge fees that accompany overuse of law in the processes (Thach et al. 138-158). It is a problem that is limiting the number of transactions due to the many procedures that are in place. Imbalance relationship is still an issue that faces the franchise industry due to the overuse of the mandatory codes of conduct (Zakaria, Garanča and Sobeih 227-241). There occurs a vast scale of imbalance in the relationships between the franchisor and the franchisee. The problem is that the two parties have different areas of action that are entirely different regarding complications. It is easy to note if there is overuse of the mandatory codes of conduct. The only way to reduce the problem is through equalization of the processes that make up the two systems in the long run. Conclusion The franchising industry has been facing great revolutions in the recent past due to the many changes that come with the adoption of the new codes of conduct. It is possible to regulate the way activities take place in the industry without predisposing the key players to controversial issues like over regulation and the red tape. The franchise industry is one of the areas that should have the highest level of liberty in the way things happen in the long run. However, without regulation, the franchise industry will be the worst area of the market to indulge into at any given time. Work cited Andersen, T. B. and T. Harr. "Franchise Values, Regulatory Monitoring, And Capital Requirements In Optimal Bank Regulation." Journal of Emerging Market Finance 7.1 (2008): 81-101. Web. Antia, Kersi D., Xu (Vivian) Zheng, and Gary L. Frazier. "Conflict Management And Outcomes In Franchise Relationships: The Role Of Regulation." Journal of Marketing Research 50.5 (2013): 577-589. Web. Berlinski, Samuel, Torun Dewan, and Brenda Van Coppenolle. "Franchise Extension And The British Aristocracy." Legislative Studies Quarterly 39.4 (2014): 531-558. Web. Campbell, Dennis, Srikant Datar, and Tatiana Sandino. "Organizational Design And Control Across Multiple Markets: The Case Of Franchising In The Convenience Store Industry." SSRN Electronic Journal n. pag. Web. Diaz-Bernardo, Ramon. "The Franchising Decision: The Perspective Of The Franchisee In The Hospitality Industry." International Business & Economics Research Journal (IBER) 8.8 (2011): n. pag. Web. Djordjevic, Branislav. "The Significance Of Franchise." ABR 3.2 (2015): n. pag. Web. Doni, Nicola. "Competition And Regulation In Franchise Bidding." Journal of Regulatory Economics 25.3 (2004): 223-242. Web. Emerson, Robert W. "Franchise Encroachment". American Business Law Journal 47.2 (2010): 191-290. Web. Guérin-Schneider, Lætitia and Michel Nakhla. "Emergence Of An Innovative Regulation Mode In Water Utilities In France: Between Commission Regulation And Franchise Bidding." Eur J Law Econ 33.1 (2010): 23-45. Web. ISHIKAWA, H. "Furanchaizu Keiyakuron (Franchise Law And Franchise Agreements)". Social Science Japan Journal 14.2 (2010): 286-289. Web. Komarova, M.E. and I.L. Polevnichaya. "Specific Character Of Franchising Networks Functioning In The Travel Industry." Research Result. SERIES «TECHNOLOGIES OF BUSINESS AND SERVICE» 1.2 (2014): n. pag. Web. Lafontaine, Francine and Fiona Scott Morton. "Markets: State Franchise Laws, Dealer Terminations, And The Auto Crisis." Journal of Economic Perspectives 24.3 (2010): 233-250. Web. Lashley, Conrad and Bill Rowson. "When Is A Franchise Not A Franchise? When It's A Pub". Strat. Change 11.6 (2002): 291-305. Web. Mirhadi Fard, Maryam, Charles J.Kibert, and Seyyed Amin Terouhid. "Towards Franchising Mobilization Strategy In Large-Scale Energy Efficiency Retrofit Industry." JSD 5.8 (2012): n. pag. Web. Park, Kwangmin, and SooCheong (Shawn) Jang. "Duration Of Advertising Effect: Considering Franchising In The Restaurant Industry." Global Journal of Hospitality Administration 31.1 (2012): 257-265. Web. Thach, Liz et al. "The Impact Of Wine Franchise Laws On Consumer Choice And Pricing". International Journal of Wine Business Research 25.2 (2013): 138-158. Web. Weaven, Scott, Debra Grace, and Ryan Jones. "Exploring Make Expansions In The Circumstances Of Franchising In Australia." J Brand Manag 19.5 (2011): 425-437. Web. Weaven, Scott, Lorelle Frazer, and Jeff Giddings. "New Perspectives On The Causes Of Franchising Conflict In Australia." Asia-Pacific Journal of Marketing and Logistics 22.2 (2010): 135-155. Web. Zakaria, Mohamad, Canada Garanča, and Abdallah Sobeih. "Cultural And Legal Challenges In Implementing Code Of Conduct In Supply Chain Management Of Mobile Phone Industries: Sony Ericsson Case Study." Social Responsibility Journal 8.2 (2012): 227-241. Web. Zeff, Stephen A. "Accounting For Initial Franchise Fee Revenue: When A Journal Article In 1970 Constituted GAAP In The Eyes Of The SEC". Research in Accounting Regulation 24.1 (2012): 1-5. Web. Read More