WA franchise bill will strengthen regulation says supporter while franchisor threatens to move interstate

By Sarah Stowe | 29 Oct 2015 View comments

Western Australian based franchisor, Quick Service Restaurant Holdings, owner of Red Rooster, Chicken Treat and now Chooks Fresh & Tasty, has threatened to move its corporate headquarters and 3800 jobs east if a bill to introduce state-based franchising regulation becomes law.

In a statement the chief executive of QSR, Mark Lindsay, said the company would be at a disadvantage against eastern states competitors, who would not have to meet the extra compliance burdens.

“And QSR is not on its own. Other WA-based businesses are expressing the same concerns,” said Steve Wright, executive director of the Franchise Council of Australia. “WA represents a $10 billion franchise sector. If this bill lands in WA, expect to see millions of dollars of future investment in small business heading off in other directions.”

One franchise consultancy, Business Development Company, has warned it will urge its franchisor clients to walk away from Western Australia and South Australia if state-based franchising laws are introduced. BDC franchise partner Phil Blain said “Franchising is never a guarantee of success, and failure of franchisees is sadly a fact of life, as in any business.”

But Frank Zumbo, the associate professor involved in drafting the bills, has responded to fervent resistance to the proposals by suggesting the bills’ opponents “should take a cold shower and settle down”.

“I’d be disappointed if franchisors latched on to alarmist fears to make decisions. I do not believe it will undermine their business in any way. Any franchisor thatÕs already fully complying with the Franchising Code has nothing to fear from the WA and SA Franchising Bills,” he said.

“The WA and SA Franchising Bills will not see the end of freedom of contract and will not bring down the franchising sector. Such claims are baseless and can simply be dismissed as self serving scaremongering. For those who remember the franchising reform debate in the mid ’90s such claims were also made in the lead up to the introduction of the Franchising Code and time has shown how baseless and misinformed such claims can be,” Zumbo said.

He told Franchising, “What we’re trying to do is ensure the Code is fully complied with. The Code has been mandatory since its introduction.”

The proposed Bills focus on financial penalties for breaches of the Franchising Code of Conduct, and definitions of good faith.

“At the moment the Franchising Code is inconsistent with other areas of the Trade Practices Act because there is no financial penalty for breaching the Code. Penalties would happen through a court process and a minor breach may not even get to court but would be dealt with in an administrative manner.

“The duty of good faith merely codifies what has been the essence of good faith in common law. It already applies,” he said.

Both the WA and SA franchising bills are intended to strengthen the existing regulatory framework, Zumbo said.

The Franchise Council disagrees and has started a nationwide campaign to collect signatures opposing the WA bill at FCA educational forums around the country.

“The FCA has also forwarded Government and Opposition copies of petitions against the good faith bill, first raised in SA in 2009 and now being promoted in WA; petitions containing hundreds of signatures, in about equal number split between franchisors, franchisees and suppliers,” executive director Steve Wright said.

To read more:

WA proposals rejected outright by FCA

Minister commits to no more change for three years

SA franchising reforms will bring industry to a halt

Franchisors comply but still room for improvement