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International criticism for WA franchising bill

Tuesday, 22 February 2011 | By Michelle Hammond

The International Franchising Association is the latest industry body to oppose the controversial WA franchising bill, calling for the proposals to be scrapped.

 

The IFA is the world’s largest franchising representative body, representing more than 1,100 franchise networks, mostly based in the USA.

 

Last year, WA Liberal MP Peter Abetz introduced a private member’s bill to strengthen the rights of WA franchisees, based on a similar bill in South Australia.

 

At the annual IFA Convention held in Las Vegas, new IFA chairman Jack Earl spoke to an Australian delegation of 48 franchise executives, representing the Franchise Council of Australia.

 

Earl said he couldn’t understand the logic of introducing state-specific franchise laws on top of an existing national regulatory regime, citing US examples of unsuccessful state-specific laws.

 

“This new legislation would be a backward step for the Australian sector and I am happy to add my voice to those who are strongly opposing the new changes,” Earl said.

 

The delegation was also addressed by former IFA chairman and franchisee veteran, Lawrence Cohen, who said he didn’t see how the bills would benefit anyone.

 

FCA executive director Steve Wright has vehemently rejected the bills, arguing Parliamentary submissions overwhelmingly oppose the campaign.

 

According to the FCA, about 120 submissions were made to a WA Parliamentary inquiry, 90% of which are opposed.

 

Wright says the submissions are proof that Abetz has failed to undertake any meaningful consultation prior to introducing the bill, stating it has the “hallmarks of vested interest campaigning”.

 

“The Abetz bill should be scrapped… Its motivation has been questioned in Parliament, its contents are ill considered and counterproductive, and its potential consequences are considerable,” he says.

 

“If implemented, it would lead to a sudden and damaging drop-off in investment and employment in the WA small business sector.”

 

Meanwhile, the IFA convention has highlighted the issues Australian franchisees and franchisors will face in the future, mainly access to credit and skills shortages.

 

According to Wright, the Australian franchising sector is “burrowing along” at a far superior growth rate to its US counterpart, but local players still face major challenges as consumer spending remains at an all-time low and the skills shortage worsens.

 

“A lot of franchisors are doing everything they can to encourage their existing franchisees to focus on internal growth via staff training,” Wright says.

 

“A lot [of franchisees] have also considered the prospect of partnering with other franchisees to try and leverage their existing business relationships… One example is Dymocks and Healthy Habits [with the establishment of Healthy Habit outlets within Dymocks stores].”

 

Wright says there is a risk associated with franchisee partnerships, as seen with the recent downfall of bookstore chain Borders, which contain Gloria Jean’s franchises.

 

“If you didn’t take that [risk] into account, that wouldn’t be very due diligence. A good, smart operator might build some protection into the agreement so that the price benefit reflects that risk,” Wright says.

 

Wright expects the franchise sector to embrace “multi-brand thinking” as businesses struggle to spark sales amidst falling foot traffic.