FCA maintaining standards of conduct

The Franchise Council of Australia (FCA) has always encouraged its members to maintain standards of conduct worthy of franchise sector professionals. One of the early features of the industry body was a Code of Ethics with which members were expected to comply. The FCA has supported sensible regulation of the franchise sector, as regulation adds credibility and helps protect the valuable and generally intangible assets of franchisors and franchisees. Indeed, the Constitution of the FCA provides that FCA members agree to comply with any standards or Code of Conduct introduced from time to time by the FCA.

One of the hallmarks of a reputable industry sector is the commitment of its members to the highest standards of personal and professional conduct. This enhances public perceptions of franchising, helps safeguard the investments of franchisors in their goodwill and systems and franchisees in their businesses, protects franchise networks from unfair or unethical attack and provides guidance for those seeking to commence their franchising journey.

When the Franchising Code of Conduct was introduced in 1998 it was felt that it was appropriate to allow members time to come to grips with the new regulatory environment before introducing any additional standards or requirements. However, the FCA board of directors believes that it is now time to consider further guidelines that, in due course, are likely to become standards of conduct. There are several reasons for this decision:

• Some of the regulatory prohibitions in the Code and Trade Practices Act are quite broad – for example, the general prohibitions on misleading, deceptive or unconscionable conduct. It would be of benefit to the franchising community if there were greater certainty as to what was and was not appropriate in key areas such as franchisee recruitment, the provision of earnings information, comparative franchisee to franchisee sales, approval of assignment, termination and dispute resolution.

• The FCA brand and logo is now well recognised and valuable. It is in the interests of all members that there be certain minimum standards of conduct for all members.

• The courts have interpreted the unconscionable conduct provisions in the Trade Practices Act quite narrowly. There would be conduct considered inappropriate for a reputable franchisor that may not constitute unconscionable conduct.

• If the FCA has a complaints process we may be able to provide a more pragmatic approach to resolution. For example, peer counselling and informal negotiations may be better than escalating the matter to an ACCC investigation or formal mediation in some cases. Similarly, mandatory attendance at FCA training may be a better remedy than a fine or court undertaking. (In the US and Canada regulators work with industry bodies, with parties committing minor breaches of the law having the option in some cases to attend training and submit to ongoing monitoring by the industry body. The ACCC appears receptive to this concept, and is interested in further discussions.)

• Occasionally members have complaints against other members. It would be useful to have an in-house process to deal with these matters.

• The Franchise Council of Australia Best Practice Guidelines are designed to provide members with an authoritative guide to acceptable standards of conduct. They are a working tool for members as they deal with difficult ethical and professional questions that arise during their careers, and enhance awareness of the need for high standards of conduct at all times.

• If a member does not comply with the requirements of the Best Practice Guidelines, investigation and disciplinary procedures are in place to handle the matter. It is not intended that breach of the Best Practice Guidelines have any legal consequences other than potentially in relation to membership of the FCA. The FCA will respond to any complaint alleging breach of the Code by a member, but does not have sufficient resources to vet documentation, audit behaviour or generally police compliance. Use by a member of the FCA logo does not carry any endorsement or certify compliance, and the FCA accepts no liability to any person in relation to any breach of the Code.

The Guidelines apply not just to franchisors, but to franchisees, advisors and suppliers. Some of the matters covered by the Guidelines include:

1. Objectivity and independence. Members must be objective, impartial and free of conflicts of interests in the performance of their professional duties.

2. Competence and due care. Members must strive to improve their technical services and to keep their knowledge up-to-date. They must be careful and diligent in fulfilling their duties to clients and employers. Members must not undertake work for which they are not licensed and competent to perform.

3. Confidentiality. Members must maintain client confidentiality.

4. The image of the profession and the society. Members must refrain from any conduct that tarnishes the image of franchising or the Franchise Council of Australia. Supplier members must respect the integrity of established franchise systems and not seek to inflame any dispute, incite litigation, generate media coverage or otherwise act in any way that is unprofessional or may create a misleading impression of the system. A supplier member must also provide a client or prospective client with an accurate written resume of their franchising education and experience.

5. Franchising activities. Members are expected to conduct their franchising activities professionally and in accordance with the law. Matters covered by the Guidelines include:

• not selling non-viable franchises;

• not selling franchises to people unlikely to be suitable franchisees;

• providing training to help franchisees;

• providing reasonable guidance over the franchise system;

• being conveniently accessible and responsive to communications;

• making every effort to resolve com-plaints through fair negotiation; and

• acting in an ethical, honest and lawful manner, avoiding overvaluation of fees and prices and avoiding conduct which is unnecessary and unreasonable.

Of course, the Best Practice Guidelines do not, and could not, cover every possible situation in which a member might face a problem about the right way to act. This is not to be used as an excuse for avoiding the requirements of the Guidelines – the conduct of members is to be governed by the spirit of the rules found in the Guidelines. If unsure about the proper way to act in a particular situation, FCA members are encouraged to seek assistance from the FCA ethics committee.

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