Proposed SA law a yolk for franchise systems, notes Franchise Council of Australia

The Franchise Council of Australia has stated that investment in franchise systems in South Australia will grind to a halt if the South Australian government goes ahead with proposed changes to legislation.

Planned changes threaten to upend regulations within the $9 billion South Australian franchise sector that have been in place for more than 25 years.

The Executive Director of the FCA, Steve Wright, says that the planned changes are at odds with the courts system, the Constitution and Federal legislation.

“If the SA Premier, Mr Rann, fails to see this, then there is a duty for the Federal Minister for Small Business, Senator Sherry, to make it clear to him. For good reason, the Federal Government has rejected past calls for the type of changes now being mooted in SA,” Mr Wright says.

The changes to franchise systems legislation within the state could result in businesses being fined up to $100,000 for being unable to disprove a subjective allegation made against them, Mr Wright explains, and be denied the right to get professional help to defend themselves.

“Add to that judgment by a single individual without any need for qualification or experience of franchising, and no right of appeal, and you have a classic kangaroo court,” he adds.

Created by South Australian backbencher Tony Piccolo last year, the changes are now supported by former Transport Minister and newly appointed South Australian Small Business Minister Tom Koutsantonis.

Mr Wright points to the success of franchise systems in the Australian economy in the past two years, when tens of thousands of small businesses had gone out of business due to the testing economic circumstances.

“Now the SA Government appears intent on turning the lights out on investment in a sector which has been a beacon in gloomy times,” he says.

Mr Wright says that the move to inhibit the growth of franchise systems in the state was more difficult to understand given the lack of evidence of any systemic problem in the sector.

He notes that “since moves for separate rules in SA were unveiled more than a year ago, the FCA has asked to see the evidence which supports the need for such dramatic change. It has not been provided.”

Earlier this year, the FCA conducted a national survey which found that 95% of respondents said franchise systems should be regulated nationally and not subject to separate state rules.

84% of respondents said that the value of franchise businesses would suffer, with close to 80% indicating that if implemented, the new rules would influence their attitudes towards investment in the state.

Mr Wright says that the survey demonstrated that there is little or no upside to the legislation, a fact that the Franchise Council of Australia has reiterated to the Government for some time.

“It would be bad for everyone in the sector - franchisors, franchisees and advisers - and damaging to South Australian economy. It is the franchising equivalent of taking South Australia back to the days of the narrow gauge railway,” he concludes.