FRANCHISE CODE CHANGES INTRODUCED AS BUSINESSES RECOVER
As Australia’s peak industry association for the franchising sector, the FCA responded positively overall to the Franchising Code of Conduct reforms announced in June by the Federal Government.
Given the dramatic impacts of COVID on small businesses across Australia, the FCA was reassured by the Federal Government’s approach to introducing the changes in the context of today’s economic reality.
The past eighteen months has proved to be the most difficult economic environment Australian businesses have ever experienced. The FCA was wary of further business failures that may arise where there are rapid or overly punitive regulatory changes.
The government appears to have taken into account the significant reforms already introduced by the FCA in response to the issues raised through the 2018 parliamentary inquiry into the franchise code of conduct and subsequent taskforce.
The FCA consulted extensively with franchisor and franchisee members as part of the industry consultation process. This included the FCA’s Policy Advisory Committee, a group comprising franchisors, franchisees and advisers, and the FCA’s Franchisee Advisory Committee.
In addition, the FCA’s Legal Committee, representing the majority of specialist franchise lawyers in Australia, was asked to provide feedback on any potential excessive compliance costs or unintended consequences.
The Government consulted heavily with the FCA through development of the new regulations and is aware of not only the steps taken to introduce new measures to ensure compliance, but also the actively supportive role played by franchise networks and the FCA to deal with COVID-19 and assist franchises and small business through the challenges.
The FCA has worked hard to address the key themes that arose in the 2018 Parliamentary Inquiry.
On the need to better engage franchisees, the FCA made significant changes. The FCA now has franchisees represented on its Board and has established a Franchisee Advisory Committee that meets regularly to consult and proactively raise issues.
The FCA revised member standards and guidelines and, during Covid-19, established a pro bono legal assistance program for franchisees needing legal advice.
The FCA also prepared and published a Franchisee Guide for prospective franchisees, containing clear, detailed information on due diligence imperatives across business, finance, legal requirements.
However, the franchising sector has not unequivocally endorsed all the proposed regulatory changes.
Member input is important to the FCA, especially feedback on the key issues for our sector in implementation of specific aspects of the revised Franchise Code of Conduct.
Feedback from a section of our membership following release of the Code revisions is that there are particularly significant business implications of the policy on rebates.
To this end, the FCA is continuing to talk with the government on behalf of members impacted by the rebates policy to develop an evidence-based case of unintended outcomes.
The FCA hopes that by clearly demonstrating the detrimental economic and employment impact on those affected businesses, the government will consider a review of the rebates policy.
For the broader membership, the FCA proposes to implement a comprehensive education and information program including a series of workshops and online sessions on general compliance requirements for both franchisors and franchisees.
Franchise Disclosure Registry
The FCA welcomed funding for a franchise registry to improve the availability of information to prospective franchisees.
The Federal Government has asked the FCA to provide input on the formation and structure of the registry as part of the implementation process, and we have been in ongoing consultation with Small Business Minister Stuart Robert as part of this.
As part of this and the broader Franchising Code of Conduct reforms, it is essential that franchise businesses have appropriate lead time to update their systems and implement changes to ensure compliance with new requirements.
The FCA welcomes the Government’s commitment to undertake an extensive education and engagement process to inform and support the sector's transition to the registry.
Businesses on the road to recovery
Franchise networks reported further recovery in revenues in the first quarter of 2021 as positive sentiment strengthened, according to the latest Australian Franchise Business “Pulse Check” survey conducted by FRANdata.
However, the continuing risk of further government lockdowns remains a key challenge, with 51% of survey respondents citing this as their main ongoing concern.
The Pulse Check survey includes responses from 113 Australian franchise systems covering 21,368 business outlets.
45% of respondents reported March 2021 quarterly revenue increases exceeding 10% compared to the March 2020 quarter. This is up from 33% in the previous quarter, reflecting the ongoing general recovery in trading conditions and a solid performance by many franchise networks.
While the risk of further lockdowns and border closures was the major concern for more than half of survey respondents, other challenges included franchisee recruitment (33%), compliance (32%), wellness of franchisees and staff (32%) and workplace relations issues (30%).
The FCA is recommending a consistent national approach on agreed thresholds for lockdowns to improve business and community confidence in this area.
FCA initiatives since 2018 to address issues raised in the Parliamentary Inquiry into the Franchise Code of Conduct:
- New member standards and guidelines
- Franchisee representation on the FCA Board
- Franchisee Advisory Committee giving feedback to the CEO
- Stronger focus on education, training and resources
- An updated FCA Franchisee Guide
- A new member complaints system
Mary Aldred is the CEO of the Franchise Council of Australia, the peak body for the nation’s $154 billion franchise sector.
Mary commenced in the role in April 2018, bringing with her extensive experience across government, industry and the corporate sectors. As CEO, Mary has led the FCA in developing and delivering strategic priorities to strengthen the FCA’s role as an effective peak business organisation and advocate for a ompliant, sustainable and profitable franchise sector.