Jenny Buchan

Franchisor Insolvency in Australia: Profiles, Factors, and Impacts

Franchisor failure is enduring and important in terms of cost, nationally and internationally. This article presents research into Australian franchisor firms that went into a form of bankruptcy protection known in Australia as “voluntary administration.” The research was driven by the commonality and divergence of the interests of franchisors and franchisees. The article provides an insight into franchisor failure and its effect on franchisees. It presents the substantial literature survey that was used to frame questions for franchisor administrators to understand issues associated with franchisors in administration. The limited data demonstrate diversity in the treatment of franchisees during the franchisors administration. In Australia, franchisees remain a captive, financially committed counterparty during insolvency and potentially deliver a great financial benefit to the franchisors creditors. The article concludes that administration of franchisors does not take into account the distinct relationship between franchisors and their franchisees and provides policy recommendations to address this matter.

Deconstructing the Franchise as a Legal Entity: Practice and Research in International Franchise Law

This article canvasses practice and research in international franchising law. The franchisor laws key concepts are introduced. I then identify aspects of franchising practice that are poorly accommodated by the law. These aspects offer opportunities for productive research. I identify these aspects as follows: franchising laws reliance on contracts to regulate the relationship through all its phases, the risk that a “franchisee” is an employee, good faith, governance, and insolvency. I continue with suggestions as to why these challenges exist. The article concludes with emerging themes in franchise practice and research: e-commerce, natural disasters, sustainability, micro-franchising, and social franchising.

The Franchise Fulcrum: The Legal System's Contributions to Research about Power and Control in Business Format Franchising

Franchisors’ need for power over their franchisees and control of their brands underpins their apparent opportunism. Through Australian and United States examples, we identify how the legal systems levers facilitate examination of opportunism within franchising. We suggest that the balance of power and control within franchising is ever changing. We suggest that all legal systems provide rich and often overlooked data for business researchers investigating franchise relationships. They should be accessed to help franchising stakeholders frame research propositions and to understand and meet twenty-first century challenges such as those posed by Gen Y and online retailing.

Asymmetry in the Franchisor/Franchisee Relationship

The seemingly intractable problem of asymmetry bedevils relationships where one party holds far more of almost everything than the other. This chapter explores the many faces of asymmetry within franchise relationships: information, adviser, education and regulator, risk and reward, resource, contract and regulatory asymmetry. It identifies how they conspire to perpetuate the imbalances between franchisors and franchisees. Within the context of asymmetry, impediments to franchisees’ ability to conduct due diligence are discussed.

The Failure of Pre-purchase Disclosure to Protect Franchisees of a Franchisor in Administration

Pre-purchase disclosure is an important aspect of the due diligence process for business format franchisees. It focuses on the financial fitness of the franchisor entity, and on the specific franchise opportunity the franchisee is evaluating. Equipped with disclosed information a diligent franchisee theoretically has the opportunity, ex ante, to identify and evaluate risks and protect itself from the consequences of making a bad investment decision. This chapter examines the efficacy of disclosure for franchisees whose insolvent franchisor enters administration. Problems arise out of the content and timing of disclosure, the difficulty of verifying the disclosed information and the conflicting requirements of the legislation protecting franchisees and that regulating administrators. Pre-purchase disclosure cannot empower franchisees to anticipate or address the consequences of franchisor administration. It fails to protect franchisees. Suggested avenues for redressing this situation are identified.

The Domino Effect: How Ansett Airlines' Failure Impacted on Traveland Franchisees

This research presents a case study of the Traveland franchise network. Following the liquidation of Ansett Airlines, the Traveland franchiser, a subsidiary of Ansett, became insolvent. The case study explores the resulting impact on a sample of the franchisees of the Traveland network. Literature on small business and franchising failure is examined, with a particular emphasis on franchiser insolvency. This preliminary research illustrates the impact of franchiser insolvency on the franchising sector and highlights the difficulty of obtaining information about businesses that have ceased to operate. It further illustrates the challenges the franchise business model poses for insolvency law.