9 recommendations the FCA put to the Senate inquiry

By Sarah Stowe | 26 Sep 2018 View comments

What does the Franchise Council of Australia suggest should come out of the parliamentary inquiry into the Franchising Code of Conduct?

CEO Mary Aldred presented a final submission to the Senate on its concluding public hearing.

The statement said the FCA is not prepared to excuse incidences of poor behaviour or standards.

“Allegations of wrong doing should be properly investigated in a timely manner, and if proven, dealt with accordingly,” Aldred said.

“A number of the stories that have emerged through this inquiry are sad and disappointing. Some of them highlight simply inexcusable behaviour,” said Aldred.

The unacceptable level of behaviour in the sector has sparked “probably the biggest crisis in confidence in franchising the sector has ever seen” she added.

However the association pointed out that it does not have a regulatory role – that lies with the Australian Competition and Consumer Commission.

The submission included the following reflections:

1. That there is a breakdown of the current compliance and enforcement regime. “Franchisees and the public are entitled to expect that existing laws will be effectively policed and consequences will flow from any breaches.

“The ACCC needs to be more proactive, and not solely reliant on a complaint-activated process. There seem to be gaps between the expectations of the public and franchisees, and the actions of regulators and agencies such as the ACCC, SBFEO, OFMA, State Small Business Commissioners.”

2. That too few franchisees are seeking legal and business advice, undermining the duality of obligation that underpins the Franchising Code – responsible franchisor behaviour, and franchisee due diligence.

3. That the real underlying issues are often industry issues – motor vehicle industry, retail food businesses in major shopping centres, convenience stores etc.

“Of those the biggest concern to the FCA is the conduct of major shopping centre proprietors – anti-competitive conduct in their controlled markets, and end of term lease negotiations being the most critical.”

9 recommendations for improving franchising

The FCA made the following recommendations:

1. Mandatory legal and business advice.

2. The introduction of a mandatory registration requirement, administered and funded largely by the franchise sector but augmented by relatively simple enabling amendments to the Franchising Code and dovetailed into existing ACCC enforcement activities.

3. Refinement of the ACCC’s compliance checking processes and enforcement actions to be more proactive and effective.

4. Consideration of reinstating a simplified form of franchisee to franchisee disclosure.

5. Support of some (but not all) of the amendments requested by the ACCC.

6. Improving the effectiveness of the Code’s dispute resolution mechanisms.

7. Translation of the Information Statement into multiple languages.

8. Review and enhancement of pre-entry educational content, with a focus on broader business skills and the needs of new entrants to Australia.

9. Compilation of an Australia-wide list of franchising lawyers and advisors to better facilitate legal and business advice, together with support materials to improve the quality of advice.

The committe will hand down its recommendations in December.