Business Franchise Australia


If it’s not broken, don’t try to fix it!

The Franchise Council of Australia (FCA) lives by the mantra that if it is not broken, don’t try to fix it. Atthe moment, we seem to be suffering from ‘fixers’ affliction’.

While Federal and State Governments rightly talk about cutting red tape for small business, we have people vigorously trying to push through new rules and regulations.

In franchising, the new rules being discussed in South Australia (SA) will not only increase compliance burden, but bring in
tough financial penalties.

At the recent National Retail Issues Forum hosted by the FCA in Sydney, there was a host of more pressing issues raised that require urgent attention to enable franchisors in this country to get on with business, rather than fighting through policy and regulation to the detriment of the sector, and small business more broadly.

The forum called for action in five key areas:

• It endorsed the continued development of a retail leasing code of conduct and established an industry working group to
finalise it;
• Called on the Federal Government to substantially reduce penalty rates that apply under Federal Awards in recognition that penalty rates are imposing unreasonable costs on businesses;
• Supported the introduction of a new venture small business assistance program modelled on the US Small Business Act;
• Called upon governments to address and neutralise ‘bracket creep’ in payroll tax; and
• Called for an end to the GST exemption on foreign e-commerce transactions.

The small business support initiative is aimed at helping credit-worthy initiatives get off the ground. The program would not lend money to new businesses, it would provide a guarantee to those lacking collateral but who otherwise meet all lending and business ownership criteria.

Forum attendees also suggested Governments ought to tighten their belts on ever-increasing payroll tax. Governments should look at lowering it, lifting the threshold or putting a freeze on growth in the government take.

Another regulatory issue raised was that of landlord-tenant conduct in retail leasing. The FCA raised a proposal to give greater
security of tenure to landlords and tenants via a voluntary retail leasing code of conduct. The leasing code would act as a guide for good behaviour, without seeking to interfere with, or add to, existing regulations. While there is some commonality in tenancy law in east coast states, there needs to be more, and at a national level; the leasing code could provide the mechanism to achieve it.

On the plus side, the Franchising Code of Conduct is undoubtedly achieving its aims at a national level – the intended purpose of the Franchising Code administered by the ACCC.

The Franchising Code certainly isn’t broken, so does not need to be fixed, which should be the end of the story at least until next year, when the Federal Government has said it will review it. The consultation period that will undoubtedly be offered should provide ample opportunity for all to have their say.

But SA Small Business Minister Tom Koutsantonis and his adviser, NSW academic Frank Zumbo, have decided that 2013 is just too far away and have embarked on what can only be bad news for SA franchising.

Mr Koutsantonis and Mr Zumbo are currently mulling over plans to introduce their own special brand of franchising regulation for SA businesses – and for businesses outside SA where the headquarters is in SA.

This contrary initiative can only be damaging to the franchise sector as it will require different rules to be applied across different states for the same business model. It will result in additional compliance burden, increased conflict and decreased
investment and employment.

This is a view shared by the Federal Government, many law and franchising experts and by the Council of Australian
Governments, which has stated its determination to stamp out duplicated or overlapping regulations.

If the Government of SA does go ahead with its plans, it will be doing a disservice to the $9 billion franchising industry in SA, a sector that employs about 50,000 people in the State.

Franchising is all about a level playing field, and everyone playing by the same rules for the benefit of the team. The SA Government is clearly not a team player when it comes to its Federal counterparts and the concept of national efficiency.