A Letter to our readers from the FCA

Damian Paull | CEO | Franchise Council of Australia

Dear Readers,

Welcome to your latest edition of Business Franchise magazine.

Franchising is a unique way of doing business and its success can be measured by the diversity of the brands and industries where franchising occurs. As recently stated by our Chair, the Hon Bruce Billson at the recent IFA Convention, “the USA may be the home of franchising, but Australia is the capital of franchising”.

Our members have chosen to use franchising as a way of growing their business and we see our role as making sure that franchising is the best way for entrepreneurs to build a great idea into a successful network – a network that can deliver real economic and social capital at local, national and international levels.

As a model of doing business, franchising is successful. We know that we have successful franchise systems delivering over $146 billion in annual turnover, through a network of over 72,000 small businesses that employ over 460,000 mums and dads, sons and daughters. The recent compliance events of the Fair Work Ombudsman together with the continuing coverage in the media around exploited workers and underpayment of lawful entitlements ensures that there will be a political response through legislative reform.

Over the past quarter, we have been engaged with the Government, advocating that as a business model franchising should be supported and encouraged, not burdened by additional liabilities that undermine the fundamental benefit of a franchising system.

Through the efforts of the Chair, the Hon Bruce Billson and the members of a small subcommittee of key subject matter experts led by Director Stephen Giles, the FCA has been working to ensure your voice is heard and that franchising as a business model is understood and valued. These efforts have been effective in educating the Minister and the Department as to the threats and unintended consequences of the proposed reforms and we achieved a number of changes that improved the Bill for members.

The Fair Work (Protection of Vulnerable Workers) Amendment Bill 2017 (‘the Bill’) was tabled in Parliament on 1 March 2017 and it is fair to say that the Government’s attempts to protect vulnerable workers through this piece of legislative drafting has fallen well short of anything workable for those businesses that use franchising as their business model.

As a fundamental principle, no-one in the franchise community wants to see an employee underpaid or knowingly taken advantage of, in a franchise setting or any other kind of workplace. The real issue here is that the risk of worker underpayment exists across the economy.

The Bill deals with several matters and the key issue for franchising is that with the additional risk and liabilities it may have the effect of stifling a value contributor to the Australian economy as franchisors assess their liabilities and perhaps consider other business models.

Franchising generates almost one in every 10 dollars in the economy, employs over 460,000 mums and dads, sons and daughters, and has been growing at a healthy rate of 2.8 per cent over a five year average. This Bill has potentially threated that employment and growth.

The compliance with the Fair Work Act is an industry wide issue and it seems unreasonable that the Government’s focus and attention has centred on franchising, where franchisors are at arm’s length to the work place practices of their franchisees. This is a workplace issue and targeting franchising potentially leaves thousands of workers at risk because the underlying behaviours of employers more broadly has not been addressed.

The FCA will continue to engage constructively with the legislative process with the aim of improving meeting the intent of the Bill while not undermining the franchise sector and model of enterprise which contributes between 8-10 per cent of Australia’s GDP.

It is now our focus to advocate improvements to the legislation, that:

• reflect reassurances about ‘right sizing’ the law for the diverse and small business nature of franchising;

• use a trigger for liability being substantial control over workplace relations;

• require Courts and regulators to take account of a system’s size and resources;

• clarity about what ‘reasonable steps’ actually means;

• focus of underpayment not paper work and technical judgements; and

• provides for an approved compliance program as a clear defence against prosecution.

International Franchising Association – Convention

In January 2017 over 50 FCA members headed over to the IFA Convention in Las Vegas to be inspired, informed and engaged with over 4500 franchising colleagues from around the globe.

This was our largest delegation and the highlights for me was our three Australian finalists in the IFA Next Gen competition, and watching a group of our 2016 CFE graduates get the opportunity to graduate with the international class of 2016. I’d like to take this opportunity to congratulate them all for pursuing excellence in their field.

The NextGen competition was amazing with 18 international finalists (three from Australia) competing for the final three places and a share of the competition prize money.

The competition was tough as they were all great business concepts and ideas. Many of them could be described as social franchises, where the business model sustained a social outcome or provided a social benefit. One example was the program from Africa where a $20,000 investment purchased a solar powered cool store that extended the life of fresh produce for up to 21 days. This increased food management, reduced wastage and had a forecast ROI after seven months based on the overnight storage cost of a food basket which was around $1.00 per basket.

Bao Hoang (Rolld), Nik Leigh (Real Property Photography) and David Lindsay (Salts of the Earth) were all winners on the day. The NextGen program was comprehensive with all the finalists being guided, mentored and coached through three days of workshops and events. These experiences are at the heart of the NextGen value proposition.

The three Aussie presentations were compelling and met the brief. Bao, Nik and David all presented well, told their stories and represented their franchise systems proudly. When the dust settled and after 18 presentations, three finalists were announced and it was great to see that David Lindsay made it to the finals.

In the final adjudication, the audience casts the final vote and David was a very worthy runner up to MakerKids, a Canadian-based educational creative concept.

On behalf of the FCA, I would like to congratulate all our entrants and finalists in the Australian aspect of the NextGen competition. It is a great concept that celebrates the very best in franchising and I am pleased to announce that we will be doing it all again this year.


Damian Paull.