The franchisor behind eyewear retailers OPSM and Laubman and Pank has committed to improve transparency in its structure and operations of its franchise system to franchisees.
In the wake of continued compliance issues and allegations of misleading behaviour in the sector, Luxottica Franchising Australia (Luxottica) has voluntarily pledged to improve communications within its network.
The announcement follows an ACCC investigation that found Luxottica’s marketing fund financial statement and disclosure document were unlikely to comply with the Franchising Code of Conduct.
The franchisor complied with the ACCC’s inquiries and has since committed to changing the documents in order to provide franchisees with a more open and transparent account of the business standing.
Under the Franchising Code of Conduct, franchisors are required to prepare an annual statement that details the marketing fund’s receipts and expenses, including who contributes to the fund and what the money is spent on.
According to the ACCC, Luxottica’s statement did not provide the required information regarding how much money the Luxottica associate that operated the corporate stores paid for marketing, or what marketing services were purchased using funds contributed by company-owned stores.
Additionally, the statement failed to disclose enough specifics about the marketing expenses, such as which brands under the Luxottica umbrella were receiving marketing funding or in what geographical locations the advertising was run.
Mick Keogh, ACCC deputy chair said that these documents are vital to franchisees within a network and must be completely accurately.
“Marketing fund contributions allow a franchisor to promote and improve their brands. The money franchisees are required to pay towards the marketing fund can be significant, so it’s very important franchisors are clear and transparent with franchisees about how the money is spent,” Keogh said.
The reports follow an increasing trend of disclosure document and marketing fund non-compliance that has seen the ACCC with a renewed focus on franchisee rights.
“Disclosure documents are a vital piece of information franchisors are required to provide their current and prospective franchisees to help them make informed decisions about whether they will buy into the franchise or renew their existing agreement,” Keogh said.
The ACCC found that Luxottica’s disclosure document was unlikely to comply with the Code as it did not identify the Luxottica associate that operated the corporate stores or that this associate managed the marketing for all-corporate owned and franchised stores.
“It’s important this document gives an open and transparent assessment of how the franchise works. People can spend significant amounts of money buying into a franchise or renewing a contract, so it’s only fair they know the exact details of how the system works,” Keogh said.
“The ACCC conducts regular checks to assess franchisors’ compliance with the Code. Where appropriate, the ACCC can pursue enforcement action for failing to comply with the Code’s marketing fund requirements”.