Government announces consultation on franchise reforms

On the whole, franchising is a successful working arrangement, the Federal Small Business Minister Craig Emerson has said, and should not be put at risk by changes to legislation. 

The Minister’s comments come as he announces the Government is set to respond to the Parliamentary Joint Committee on Corporation and Financial Services inquiry into franchising. The Government will also take into account the franchising inquiries held in Western Australia and South Australia.

Final input will be sought from franchising stakeholders and an options paper will be released in the next few weeks before a formal response is given, possibly in late July.  

"In the reform process we can do better than a them-and-us approach,” the Minister said. 

“Genuine misunderstandings occur from time to time, sometimes relationships between franchisors and franchisees break down and sometimes people on both sides do the wrong thing.

"Yet most franchise arrangements work well and these good working relationships must not be jeopardized by the reforms.

"If the reforms are to be worthwhile and enduring it is worth taking the time to get them right." 

The Franchise Council of Australia has welcomed the Government’s annoucement. Executive director Steve Wright applauded the Minister’s remarks which he described as a sensible and positive approach.  

He said “It is our intention to be inclusive of franchisors, franchisees and suppliers because this is the triangle of stability in the sector and we know what happens when you remove one leg from a triangle, it moves from a stable to an unstable structure.

“The FCA is firmly of the view that an all inclusive approach is sensible and not the adversarial, dispute-creating approach of pitting franchisee interests against franchisor.”  

He went on to reiterate that this consultation is not about the report itself but the Government’s response.  

"We’ve not yet seen the Government response. This will be new territory to us, as to others, because we’ll be dealing with new material. We’ve not changed our philosophical approach to date, but we’re certainly open-minded to what the review will turn up.”  

South Australian MP Tony Piccolo has been a vociferous critic of the government’s lack of response to the report and he told Franchising he welcomed the announcement.  

"I’m hoping for some action fairly shortly and that won’t be a minute too soon given the state of the economy and the number of people who will be retrenched and looking to buy a franchise.

"My view is quite strongly that the existing laws are inadequate.”  

Ultimately Piccolo is looking for three areas of concern to be addressed: the issue of good faith, dispute resolution and penalties for law-breaking.

"That will go a long way to addressing the concerns of franchisees." 

He added, “I want to make it clear reform is not about protecting people from bad decisions. But at the moment if the franchisor doesn’t deliver the franchisee’s only recourse is the Federal Court.”  

Piccolo said he would monitor closely the progress of the consultations and options paper and left the door open for state based reform if the commonwealth failed to deliver.  

* The Joint Committee’s report, Opportunity not opportunism; improving conduct in Australian franchising, was released in December 2008 with 11 recommendations including the issue of good faith, a better balance of franchisee and franchisor rights and liabilities in the event of franchisor failure, and the disclosure of the process for franchisees to sell their business as a going concern.  

This article appears courtesy of 5 Minute Franchising Newsletter