Franchise Council of Australia

Steve Wright, Executive Director

On the last day of January this year, South Australia (SA) joined Western Australia (WA), Queensland, New South Wales and Victoria in announcing the establishment of a Small Business Commissioner office, set to commence operations in March 2012.

The Franchise Council of Australia (FCA) welcomes the move by the Government of SA. Especially if it is an office which, like other States focuses on quick and affordable dispute resolution.

The FCA does not welcome the appointment of the Deputy – and Acting – Small Business Commissioner (SBC), academic Frank Zumbo, of the University of NSW.

The appointment appears audacious and definitely a first. The FCA believes having a Deputy and Acting SBC doing the job one day a week from his university office in another State as unprecedented, untenable and dismissive of small businesses and taxpayers in SA.

The political process in which he was involved has been questioned by the Law Council of Australia, and the law societies of Queensland and SA – the position was not even advertised.

Associate Professor Zumbo has been an activist for new franchising legislation in SA, WA and elsewhere. A self-proclaimed expert on franchising, he has frequently described a need to toughen franchising legislation to eliminate unnamed ‘rogues’ and has been an advocate for a new definition of ‘good faith’ negotiations between franchisors and franchisees – a concept rejected by the Federal Government, Labor and Liberal Governments in WA, and a series of thorough studies done by experts in competition and trade practices.

Mr Zumbo was paid large consulting fees by the Government of SA in the lead-up to the introduction of the SA SBC legislation. During this period he conducted stakeholder meetings with a number of business representatives – but not with any member of the Adelaide-based or national franchising community, as far as the FCA can ascertain.

Against this background, it is impossible for Mr Zumbo to claim impartiality on franchising matters. Accordingly, the FCA has called on him to recuse himself from consideration of any franchising issue brought before the new SA SBC office.

On a positive note, towards the end of February the FCA held a retail issues forum to discuss all the pressing concerns for the retail sector for 2012 and beyond.

All major retail associations, the ACCC and other relevant state and federal government departments were invited to attend. At the forum, the possibility of a real payroll tax freeze was discussed, Government assistance for small business was analysed (see FCA Chairman Stephen Giles’ column) and the FCA reaffirmed its commitment to continuing its push for a voluntary Retail Leasing Code of Conduct.

The FCA would like to see the franchisor/franchisee mutual benefit principle applied in retail leasing to the landlord/lessee relationship, especially with the retail landscape currently experiencing difficulties.

The FCA’s main areas of focus for the Code are on substantiation of dramatic changes to lease terms, including price, length of term and conditions such as fitout and defit requirements; reciprocal disclosure of information and the process which occurs at the end of a lease.

Other areas of focus are substantiation of rival offers for existing tenancies and dispute resolution.

In franchising, dispute resolution is mandatory and the disclosure obligations rest primarily with the franchisor. The reverse is true in retail tenancies. There is clear opportunity to adjust this imbalance – and to do so without detriment to either party.

These concerns are not new, nor are the potential remedies. To a significant extent, they already exist in the franchising world. It is the FCA’s hope landlords will recognise this and engage constructively to see what positives can be taken from the franchising operating model and applied to retail leasing.

About half of the 70,000 franchise sector businesses (franchisee units) in Australia are retail based. This provides a very strong backbone to the many shopping strips and shopping centres in cities, urban centres and regional centres.

The FCA looks forward to bringing you the outcomes from the FCA’s retail issues forum in the next issue of Business Franchise Australia and New Zealand Magazine.