Potential Senate inquiry for franchising
Could the franchising sector be facing a Senate inquiry?
Senator John Williams has proposed a parliamentary inquiry into the franchise model and is confident he has the numbers to move ahead with proceedings by 20 March.
The prospective inquiry is expected to assess the effectiveness of industry regulation, including the Franchising Code of Conduct, transparency in the industry and whether further legislation is needed to address any structural issues arising from the business models of large franchise networks.
Bruce Billson, executive chairman of the Franchise Council of Australia, has responded to the calls for a Senate inquiry.
“It is odd that no-one from government has bothered to contact the peak industry body for franchising about what the chatter would suggest is being cooked up,” he told Inside Franchise Business.
“The Franchise Council of Australia is as keen as any party to identify, understand and see addressed any specific shortcomings in individual business conduct that may have contributed to the failure of a franchise business beyond the challenges and rivalries of a highly competitive market.”
Billson suggests a better approach would be for an objective review and analysis of how franchise success can be improved and how to retain Australia's reputation as an international leader in franchising.
He believes this would be “constructive, positive, open-minded, rigorous and confidence building”.
“We asked that its purpose and scope include identifying any deficiencies or gaps in the current regulatory framework with the view to recommending any necessary regulatory-policy change, adjusting agency operations and instigating public education and awareness campaigns or industry-led initiatives, having considered a thorough assessment of the likely impacts.
“We believe some scrutiny of regulatory enforcement action would be helpful and beneficial at this time, given the comprehensive nature of the current regulatory framework and troubling reports of it not being applied,” Billson said.
“An evidence-based examination of cases of the publicised allegations of inappropriate conduct by specific franchise systems that are claimed to have led to franchisee business failure” is the most effective response to high profile criticism and “ill-informed franchise model condemnation”, he suggested.
Michael Sherlock, former chief of Brumby’s, has now joined the chorus of those calling for reform, advocating for more transparency around supplier rebates and franchise agreements.
He has called for similar registration procedures to commercial leasing, suggesting disclosure documentation, including franchise agreements, be registered with ASIC to improve transparency.
“A disclosure document should include a table of all revenue streams to the franchisor and also highlight upgrade costs such as IT and auditing that can be applied at the whim of the franchisor,” he said.
“There should also be a separate table of fees and costs upon renewal of a franchise term as well as a separate table of fees to sell the franchise.”