Senate inquiry into franchising goes ahead

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Inside Franchise Business: franchising will face a Senate inquiryFranchising will be put under the spotlight as a Senate inquiry into the sector gets the parliamentary go-ahead.

Bruce Billson, executive chair of the Franchise Council of Australia, has called for a positive approach to the upcoming scrutiny, despite the FCA not being consulted on the terms of reference or invited to contribute to the submission calling for an inquiry.

Billson said an “objective, balanced, informed and analytical inquiry” could provide conclusions and recommendations that can help “to ensure Australia maintains its reputation as a leading economy in which to develop and deploy the franchise model of entrepreneurship”.

“This kind of informed and thoughtful examination will help to identify any deficiencies or gaps in the current regulatory framework, unfair contract and fair trading protections and dispute resolution mechanisms, which the Senate has resolved to be the focus of the inquiry,” he said.

Nationals Senator for New South Wales, Senator John Williams, was instrumental in referring the franchise sector to the Parliamentary Joint Committee on Corporations and Financial Services for an inquiry and report by the 30 September 2018.

The franchise model had been called into question by mainstream media following high profile instances of franchisee dissatisfaction and failure.

Michael Sherlock, former chief of Brumby’s, has been critical of bad franchising but insists the model itself is not at fault.

“I have been involved in franchising for 45 years and have seen the sector grow from a small American concept used by fuel distributors and then McDonalds and KFC in the 1970s into a $170 billion sector which has almost 80,000 operating franchises and half a million employees,” he said. “Franchising done well significantly increases the chances of success for a small start-up business.”

Sherlock has also called for "leadership and strategy" in the sector. He told Inside Franchise Business “I feel franchising has been driven into an iceberg, and it needs a captain. The franchising sector needs new voices to be heard, not the FCA and lawyers. It’s hoped the parliamentary inquiry will result in some positive changes.”

7-Eleven has welcomed the Senate inquiry.

Chief executive officer, Angus McKay, said the terms of reference are wide enough to encourage a balanced debate.

“We share the concerns at recent developments within the broader franchising sector, and look forward to contributing to the work of the Joint Parliamentary Committee in developing recommendations to raise the standard across the sector and ensure a transparent, balanced and hopefully prosperous partnership between franchisor and franchisee,” said McKay.

The FCA is encouraging all stakeholders in the success of Australian franchising to contribute to the parliamentary inquiry.  

"This will assist the Committee to identify the causal factors, including third party conduct by parties outside the franchise relationship, and the role of the franchise business model and its contribution to business viability, when considering cases of poor commercial outcomes," said Billson.

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