Pressure Points for Small Business: Misleading Sales, Tight Credit, and Safety Concerns
This week’s developments highlight the compounding pressures facing small businesses and, by extension, franchise networks across Australia. From the ACCC’s findings on widespread misleading unsolicited sales practices, to the fragility of small business lending exposed by Judo Bank’s loan defaults, and Victorian businesses citing crime as a driver of major operational decisions, the operating environment demands careful attention from both franchisors and franchisees.
ACCC finds misleading and high-pressure unsolicited sales practices widespread
An ACCC review has found widespread misleading and high-pressure practices in door-to-door selling, telemarketing, and other unsolicited sales channels.
Franchise networks that use door-to-door or telemarketing sales channels are squarely in the firing line of this review. The Australian Consumer Law prohibits misleading or deceptive conduct and unconscionable behaviour, and the ACCC’s findings point to a heightened enforcement focus in this area. Franchisors should review the sales scripts, training, and incentive structures used across their networks to ensure compliance and reduce vicarious liability risk.
Why small businesses in Australia have a hard time getting finance
Judo Bank flagged three business loans turning bad, triggering a swift market reaction and highlighting the ongoing challenges facing small business lending in Australia.
Access to finance is a persistent problem for franchisees, who typically rely on bank lending to fund franchise fees, fit-outs, and working capital. When specialist small business lenders tighten credit in response to loan defaults, prospective and existing franchisees face higher borrowing costs or outright refusals. Franchisors should consider how financing difficulties within their networks may slow expansion plans and increase franchisee financial distress.
Regime change a critical juncture for Victorian businesses
Seven in 10 businesses told the Victorian Chamber of Commerce and Industry that crime and safety concerns have affected major business decisions.
Crime and safety issues directly affect franchisees running retail and food outlets, influencing site selection, operating hours, staffing costs, and insurance premiums. Franchisors with networks in Victoria should keep a close eye on the policy environment and consider whether additional operational support or security measures are needed. Changes in government may also bring shifts in small business regulation, industrial relations, and planning laws that affect franchise operations.
Key Takeaways
- The ACCC’s findings on high-pressure and misleading unsolicited sales practices should prompt franchise networks to audit their own sales channels and ensure compliance with Australian Consumer Law obligations.
- Judo Bank’s flagged bad loans and the resulting market reaction underscore how precarious small business finance remains, a reality franchisees seeking funding for new or existing operations must factor into their planning.
- With seven in ten Victorian businesses reporting that crime and safety concerns are influencing major decisions, franchisors should consider whether their site selection, lease negotiation, and operational support frameworks adequately address these risks.
- Franchisors bear a responsibility to ensure that neither their own teams nor their franchisees engage in sales conduct that could attract regulatory scrutiny, particularly in light of the ACCC’s increased focus on unsolicited selling.
- Tightening credit conditions reinforce the importance of realistic financial disclosure and robust due diligence at the pre-entry stage of franchising, so that incoming franchisees are not set up for financial distress.
Franchise lawyer since 2008, acting for franchisors and franchisees across the full franchise lifecycle.
minervalaw.com.au