Franchisors have been given a fresh reminder of the brand damage they can suffer from the actions of individual franchisees with the launch of a new ‘name and shame’ Complaints Register from NSW Fair Trading.

In what is Australia’s first consumer Complaints Register, NSW Fair Trading is now publicly releasing a monthly list of NSW businesses that are the subject of multiple consumer complaints.

Two prominent franchise groups topped the first NSW Fair Trading Complaints Register – LJ Hooker with 31 complaints, followed by Harvey Norman with 29. AirAsia, Ray White, The Good Guys, Apple, Foxtel, Groupon and Flight Centre also made the list.

NSW Fair Trading Commissioner, Rod Stowe, said the new Complaints Register is a win for consumers, giving them greater information and choice in the marketplace.

At the release of the first list, he also defended the decision by NSW Fair Trading to aggregate data under the umbrella brand name for retail groups and franchises.

“This is the name these traders use when promoting their businesses to the public and this is the name consumers identify with when making a transaction,” Mr Stowe said.

Australia’s leading consumer advocacy group CHOICE has welcomed the NSW Complaints Register and has called on other states to follow the lead of NSW Fair Trading. CHOICE also defended the naming of the umbrella brand names in the NSW Complaints Register.

According to the CHOICE website, LJ Hooker had argued that the name and shame tactics were unfair since it casts a negative light on the entire brand instead of the 31 individual offices (out of 230 in NSW) that were subject to the complaints.

“When you buy into a franchise, you buy into its reputation, taking on the good and the bad, so we think it’s right that franchisees should be listed under their common brand,” said CHOICE head of media Tom Godfrey.

Since the release of the first Complaints Register, NSW Fair Trading has since modified the name and shame process so the location of the business is also listed.

“By publishing location data, we address industry concerns and give branches and franchises a strong incentive to improve their business practices,” Mr Stowe said.

NSW Fair Trading said the effectiveness of publishing the complaints data is highlighted by the fact that fewer businesses are appearing on the monthly list. It said this is a result of the proactive steps NSW businesses are taking to avoid appearing on the register.

For franchisors, the launch of the NSW Fair Trading Complaints Register, and the calls for it to be introduced in all states, is a timely reminder of the damaging effect that the customer service behaviour of individual franchisees can have on their overall brand health and reputation.

It reinforces that there is always the risk that one bad egg can sour the whole carton and franchisors need to be more mindful than ever that the actions of a few, no matter how small, can tarnish the majority in a franchise network.

There is something very wrong in the service process if consumers are taking their complaints to Fair Trading and it is not enough for a parent company to dismiss this as the just the isolated acts of a minority with no impact on the group as a whole.

That is not how brand reputation works. Just one bad customer experience has the potential to multiply enormously, and franchise groups are right in the crosshairs of this risk due to the shared trading name and brand throughout their network.

‘Free riders’ is a term that describes a common problem in franchising relating to those franchisees that are happy to take a free ride on the back of their franchise system. Free riding franchisees enjoy the benefits of the hard work and diligence of their fellow franchisees and their brand strength, without making the required effort in their own business and customer service standards.

The individual actions of such free riders can create huge risks for an entire franchise network. Too many free riders, and your brand and reputation can dissolve rapidly.

The naming and shaming of franchise brands by the NSW Fair Trading Complaints, for complaints that relate to individual franchises, highlights the damage that free riders pose in any franchise groups.

As a result, franchisors must always be vigilant of the risks that are inherent in every cog of their franchise network and must continually stress the importance of all franchisees maintaining the group’s minimum customer service standards at every customer interaction, for the benefit of all.