Franchising is on the whole 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 MinisterÕs 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 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 GovernmentÕs annoucement. Executive director Steve Wright applauded the MinisterÕs 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 GovernmentÕs response.
“WeÕve not yet seen the Government response. This will be new territory to us, as to others, because weÕll be dealing with new material. WeÕve not changed our philosophical approach to date, but weÕre certainly open-minded to what the review will turn up.”
South Australian MP Tony Piccolo has been a vociferous critic of the governmentÕs lack of response to the report and he told Franchising he welcomed the announcement.
“IÕm hoping for some action fairly shortly and that wonÕt 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 doesnÕt deliver the franchiseeÕs 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 CommitteeÕs 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.