Luxottica Franchising Australia (Luxottica), the franchisor of eyewear retailers OPSM and Laubman and Pank, has committed to be more transparent about the structure and operation of its franchise system to franchisees.
The commitment 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.
Luxottica cooperated with the ACCC’s inquiries and voluntarily committed to change the documents to give franchisees a more open and transparent account of the business.
Under the Franchising Code, franchisors must prepare an annual financial statement detailing the marketing fund’s receipts and expenses, including who contributes to the fund and what the money is spent on.
Luxottica’s statement did not provide information about how much money the Luxottica associate that operated the corporate stores paid for marketing, or what marketing services were purchased using money contributed by company-owned stores.
Further, the statement did not disclose enough specifics about marketing expenses, such as brands (OPSM or Laubman and Pank) the marketing funds were being spent on, or in what geographic locations the advertising was run.
“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,” ACCC Deputy Chair Mick Keogh said.
The ACCC has observed that some franchisors are not providing sufficient detail in marketing fund statements. Franchisors need to ensure that franchisees are provided with ‘meaningful’ information about the marketing funds’ sources of incomes and items of expenditure.
Luxottica’s disclosure document was also 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.
“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,” Mr Keogh said.
“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.”
“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,” Mr Keogh said.
Luxottica is the franchisor of OPSM and Laubman and Pank optometry stores in Australia.
Luxottica’s ultimate holding company, Luxottica Group S.p.A, is the world’s largest supplier of eyewear, with net sales of over €9 billion in 2017.
Businesses can access further information about the Franchising Code from the ACCC website.
The ACCC’s 2018 enforcement and compliance policy sees ensuring small businesses receive the protections of the Franchising Code of Conduct as an enforcement priority.