Coalition to shake-up franchise sector

 

Study, education, work, learningThe federal government will address the power imbalance between small business franchisees and their franchise masters, potentially allowing penalties of up to $50,000 for companies that break the industry’s code.

Small business minister, Bruce Billson, told The Australian Financial Review the conduct of some big franchises towards their franchisees was a concern and the coalition would introduce some of the recommendations of the 2013 Wein review of the franchising code.

“There are real pressures in the franchising sector where there’s a heavy dependence [between parties] and it’s not an adult-to-adult commercial relationship,” Billson told the AFR.

Billsion added the Abbott government would take action early this year “to maintain world class regulatory support for a crucial part of the economy”.

“Most people don’t realise that a small business has no more market power than an individual so we’ve made a commitment in that space to advance it in the coming year.”

 

Comments

9 comments

  1. TG posted on January 6, 2014

    Fabulous news! The first one they should investigate is Pie Face!

    • CL posted on January 31, 2014

      The first one they should talk to is the Theobroma Chocolate Lounge Franchisees, they will then learn, how the franchisor "round-up" the franchisees and squeeze them from every conrners, and treat the marketing fees as money in their own pocket!!!

  2. Stephen Giles posted on January 6, 2014

    It is worth noting that the Franchise Council of Australia has been working in a highly collaborative way with the Federal Government to improve the regulatory framework. One of the problems identified by the Wein Report is that the regulation is now so complex that the disclosure material provided to prospective franchisees is difficult to understand. So franchisees are not reading it, and are not obtaining legal or business advice prior to entering into a franchise agreement. Just as Minister Billson expects behavours to be "adult", similarly those entering into a business relationship need to understand it is an "adult" relationship and they must take responsibility for conducting their own due diligence. The Australian regulatory environment for franchising is indeed world's best, with disputation at very low levels and very effective prior disclosure and dispute resolution processes. However this framework is built on twin pillars - responsible franchisor behaviour, and franchisee due diligence. It is insightful to note that in almost 100% of the cases where the FCA has fielded complaints from franchisees over the past 18 months the franchisees had failed to obtain legal and business advice notwithstanding the clear intent of the Code in this regard. The FCA supports penalties for flagrant breaches of the Code. The FCA also strongly supports the structure of the current regulatory regime, and enhancements which simplify compliance, improve the quality and relevance of information and reduce compliance costs. Over 95% of franchisors, and almost all franchisees, are small businesses.

    • lew hoek posted on January 6, 2014

      How about a simple version of the agreement which would assist both parties this can cover ALL essentials details required to give a clear degree of comfort to both parties same as the simple or short version of a commercial lease agreement its not that hard .

  3. TG posted on January 6, 2014

    have to disagree . . . all the due dilgence and legal advice in the world will not protect you from a franchisor who does not provide fair and reasonable financial models and simply hides behind the 'these are just estimations' clause . . .

  4. Gary Bargwanna posted on January 6, 2014

    The FCA is a joke. There is a huge power imbalance between the franchisor and franchisee. About time the politician's supported the small business sector. More power to Minister Billson.

    • CL posted on January 31, 2014

      AGREED! In fact the FCA logo is heavily used by the franchisor as a prove that the franchise is AAPPORVED!

  5. Stephen Giles posted on January 7, 2014

    The bottom line is that franchising is a team effort, with each party reliant on the other for success. There is a lot of hype about franchisor behaviour from a small but vocal minority, but our research shows that the vast majority of franchisors do the right thing. A greater concern, which the FCA is looking to address, is people going into franchising without reading the material provided to them or getting advice. It is a legitimate coping mechanism to seek to blame others when things do not turn out as expected. When you look at the causes of business failure in all business, including franchised businesses, the single most critical differentiating factor in determining business success is customer service excellence. In a recent survey by Griffiths University as to the need for further legislation, successful business operators felt they had more than enough information to make an informed decision. A greater proporition of unsuccessful business operators said they did not have enough, and indeed confessed that they did not obtain proper advice. But of course they all received the same information. Going into business, including a franchised business, is a very serious decision. All businesses, including franchised businesses, can fail. And any financial information provided can only ever be a guide, not a guarantee. So much depends on the operator of the business. What the FCA is keen to do is ensure that the real messages about franchising get out there. The key message is to follow the Franchising Code process, and get legal and business advice prior to signing a franchise agreement. The last thing we want is even more regulation that adds compliance costs, penalises those that do the right thing, and still does not address the fundamental issues.

  6. TG posted on January 10, 2014

    OK then - Stephen Giles . . .you are right . . . nothing to do with Franchisors . . . all to do with idiot Franchisees who don't seek the right advice, then. Great - glad that is sorted out.

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