All signs point to a healthy sector and a modernisation of regulation

Michael Paul, FCA Chairman

This article appears in the September/October 2013 issue of Business Franchise Australia & New Zealand


At the time of writing, the Federal Government has just commenced a regulatory impact analysis on the recommendations contained in the Wein Report.

Following a consultation period that closed on the 9th of July, the Government released its response to the Franchising Code of Conduct review, which has been continuing in various phases since early January this year.

The news is good. Minister for Small Business Gary Gray, along with Parliamentary Secretary for Small Business, Bernie Ripoll released a response on the 24th of July accepting all the recommendations in the review, in entirety, part or principle. Given the sector was heavily involved via submission processes prior to both the review and the Government response, it is reasonable to believe that a wide cross section of stakeholders in franchising have been heard. It also appears from the response the current Government, while requiring further analysis, is upbeat about the future of franchising in this country.

What has come out of this process is a consolidation and modernisation of the Code that regulates our sector:

• The obligation for both franchisors and franchisees to act in good faith, while historically present under common law, will likely be included as an express obligation for both parties under the Code;

• It is probable disclosure requirements will be updated to include the rights of both the franchisor and the franchisee to conduct and benefit from online sales;

• It is most likely the Government will legislate to ensure the ACCC has the power to seek pecuniary penalties and infringement notices for Code breaches.

The response also outlines the plan to ‘clarify the policy intent of provisions of the Code which have caused unintentional confusion of an administrative burden without any corresponding benefit’. Ours is a sector that has evolved with the rest of the Australian business community. Reassuringly, our regulatory framework is one that simply needs updating to reflect the current state of doing business in Australia and globally, rather than one that needs fixing.

In its response, the Government confirmed its commitment to the sector through initiatives such as the Office of the Franchising Mediation Adviser and free preentry training sponsored by the Australian Competition and Consumer Commission. The Office of the Franchising Mediation Adviser (OFMA) is a wonderful resource for franchisees and franchisors alike to assist in both early intervention, and phone and face-to-face mediation. Government funded, the OFMA provides a free or low cost  means of dispute resolution and peace of mind for franchisees.

Close to the heart of the FCA is credibility. The Government’s added focus on preentry education and transparency through disclosure aligns with FCA member standards, and works to enhance Australian franchising. When proper due diligence is performed by a prospective franchisee, both on their chosen system as well as their own financial situation and desired lifestyle, franchising as a business model really is win-win.

To that end, it was encouraging to read in a release from the ACCC in July, that not only were complaints down almost 40 per cent in the last six month period, there have now been more than 4,500 successful completions of the Griffith franchisee  pre-entry course sponsored by the ACCC.

Timing around the regulatory impact statement and implementation of changes is still unknown. According to the response, implementation will take place ‘as soon as feasible’. With limited days left on the parliamentary calendar, a new process for regulatory impact analysis, and two pieces of legislation to update (the likely changes will require updates both to the Code and Competition and Consumer Act 2010), we can assume there will not be much movement until after the Federal election.

Regardless of when the election takes place, input from across the franchising community has ensured any changes to our sector will reflect what is best for franchising in Australia.

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