Opinion: Mortgage Choice belongs in franchise sin bin

The culture and the model are the real problem here. This has nothing to do with the mortgage broking industry or its remuneration model (which the franchise recently said it was updating).

A quick look back at the third round of royal commission hearings shows a similar trend. The commission was looking for examples of misconduct among banks and brokers, but franchise businesses — Pie Face and Poolwerx, among others — were a common thread in the case studies.

Mortgage Choice has reportedly come under fire from up to 173 franchisees unhappy with their current arrangement. This story, which made the front page of SMH on Tuesday, shouldn’t derail ongoing efforts by the mortgage broking industry to secure the viability of the current remuneration model.

It would be a shame for this latest headline-grabber to muddy the work of the CIF and the industry at large.

Rather, it should be viewed as part of a more systemic problem with Australia’s franchise industry. The sector has been embroiled in numerous scandals in recent years that have seen 7-Eleven and Caltex sanctioned by the Fair Work Ombudsman.

As a result, the Australian Senate announced on 21 March this year that a parliamentary inquiry will investigate the franchising sector. Submissions closed last month and a report is due by 30 September 2018.

Among the 90 submissions made by franchisees from fast food groups, there was one from a Mortgage Choice broker: Leon Azlin, owner/manager of a Mortgage Choice franchise located in Churchill, Victoria.

Mr Azlin was named in the SMH story this week and his submission reveals that Mortgage Choice is now moving to terminate his franchise agreement due to low home loan settlements.

Prior to signing with Mortgage Choice in 2011, Mr Azlin said that he was provided with a copy of the group’s disclosure document, which recorded one existing Mortgage Choice franchisee in the marketing area, who Mr Azlin was “happy to work with, exchange leads and provide support to each other”.

“We were also aware of the marketing activities being conducted by a Melbourne (Casey) metro MC franchisee in the Gippsland area,” Mr Azlin said.

“MC explained to us that these would cease and were in fact just the remnants of the past when this franchisee was appointed as ‘caretaker’ to the area pending the appointment of a new franchisee.

“What MC did not tell us was that this franchisee had at the time been conducting franchise activities from ‘unbranded’ office premises in the main street of Traralgon and has continued to do so for the past 19 years. Traralgon carries the largest population of all postcodes within our marketing area (population say 30,000).”

Mr Azlin’s franchise marketing area covers Eastern Victoria (Gippsland).

“During June 2014, we were made aware and offered office/suite premises within the heart of the Traralgon CBD (a national real estate agency). We saw this as an opportunity to grow our residential business and also appease MC,” Mr Azlin continued.

However, the request to Mortgage Choice was denied on the basis that the premises had to carry the full Mortgage Choice branding.

During 2015, similar premises were also identified, but again Mr Azlin was denied this opportunity by Mortgage Choice on the basis that full branding was required.

“At no stage did Mortgage Choice accept our offer to inspect the suites. As anticipated, we have not been able to grow our business and as a result MC are now moving to terminate our franchise agreement due to low residential home loan settlements.”

The SMH’s Mortgage Choice story is well timed: the parliamentary inquiry into franchising kicks off this Friday in Brisbane.

[Related: Major brokerage to overhaul remuneration structure]