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Conditions for effective disclosure in the regulation of franchising

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  • Elizabeth Spencer

Abstract

This paper outlines the use of disclosure in the regulation of the franchise sector in Australia, demonstrating that it does not meet conditions considered necessary for effective informational regulation. First, there is not enough reliable information to gauge the risks in informing the design of regulatory process and the choice of tools; second, the information in the disclosure document is not uniformly reliable, accessible and useable; and, third, a franchisee's ability to act on the information is limited because the franchise contract is not subject to negotiation and there are limited alternatives in the market. As potential solutions, this paper proposes that increased cooperation among and fuller representation of stakeholders, better information from dispute resolution processes, and registration of disclosure would improve the level of information about the sector generally. To ensure reliable, accessible and useable information, the information that is required to be disclosed should be identified by all stakeholders, with assurance that it is provided in an accessible, useable way. Finally, educational initiatives are needed to enhance franchisees' ability to act on the information. This paper also briefly surveys some other regulatory tools used in the regulation of franchising, but urges that these tools be selected as part of a democratic and participative regulatory process that accurately represents the interests of all stakeholders.

Suggested Citation

  • Elizabeth Spencer, 2008. "Conditions for effective disclosure in the regulation of franchising," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(4), pages 509-525.
    • Handle: RePEc:taf:irapec:v:22:y:2008:i:4:p:509-525
    DOI: 10.1080/02692170802138289
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    References listed on IDEAS

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    1. Baldwin, Robert & Cave, Martin & Lodge, Martin, 2011. "Understanding Regulation: Theory, Strategy, and Practice," OUP Catalogue, Oxford University Press, edition 2, number 9780199576098, Decembrie.
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    Cited by:

    1. George Hendrikse & Patrick Hippmann & Josef Windsperger, 2015. "Trust, transaction costs and contractual incompleteness in franchising," Small Business Economics, Springer, vol. 44(4), pages 867-888, April.
    2. Wright, Owen & McAuley, Andrew, 2012. "Australian franchising research: Review, synthesis and future research directions," Australasian marketing journal, Elsevier, vol. 20(2), pages 158-163.
    3. Courtenay Atwell, 2015. "The Franchisee as a Consumer: Determining the Optimal Duration of Pre-Contractual Disclosure," Journal of Consumer Policy, Springer, vol. 38(4), pages 457-489, December.
    4. Atwell Courtenay, 2015. "Cooling off periods in franchise contracts: from consumer protection mechanisms to paternalistic remedies for behavioral biases," Business and Politics, De Gruyter, vol. 17(4), pages 697-721, December.

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