Franchise Council of Australia
The long awaited publication on Friday of the government’s review of the Franchising Code of Conduct has been welcomed by the franchising sector. The Franchise Council of Australia and the Franchise Advisory Centre have both backed the 18 recommendations in the review conducted by franchising expert Alan Wein. The major change pushed by the review is its recommendation to incorporate the common law duty of good faith into the code, rather than devising some new and different definition of good faith. The report also rejected calls for mandatory extension of franchise agreements, and compensation at the end of the franchise term. The review found the Australian franchise sector operates well. Wein wrote that the Franchising Code of Conduct is “a robust model” and “generally operates effectively within a very dynamic and difficult economic environment.” Wein also noted the relatively low levels of complaint and disputation in the sector. Stephen Giles, partner at law firm Norton Rose and deputy chairman of the Franchise Council of Australia, told SmartCompany the Wein Report affirms the health of the franchise sector. “There are good recommendations to improve disclosure and address perceptions about good faith, and also try to reduce potential red tape,” he says. “One of the key things for us is that the Franchising Code of Conduct is a single national framework, not state-based.” Jason Gehrke, director of the Franchise Advisory Centre, is also backing the recommendations. “I think there is something in the recommendations for everyone,” he says. “There are suggested improvements on technical aspects to the code which have been of concern for a while and there are things there which will contribute towards a greater level of best practice of franchising in Australia, which already is world’s best practice anyway.” Gehrke praised the review’s introduction of a good faith provision. “I think a definition of good faith is always problematic, so the solution that good faith is not to be defined in the code but it is to be acknowledged, is the best possible outcome,” he says. The FCA and FAC both believe the changes advocated in the review will not increase red tape in the franchising sector. “As a small business sector we are always conscious that there is a lot of regulation of franchising relative to other areas of business but I think that is just a function of franchising being more identifiable,” Giles says. “The key will be to make sure the actual amendments implement the intent of the review.” Gehrke also says whether or not red tape increases depends on the translation of the recommendations, as “the devil will be in the detail”. “Conceptually the recommendations are understandable. How they translate into the practical day-to-day conduct of a commercial entity might require a lot more detailed thought,” he says. The changes recommended in the review have bipartisan support, so the FCA and FAC both hope they are quickly legislated. “Both the small business minister and shadow small business minister have no great desire to have this as a battle ground for the election,” Giles says. The full report is available here. This story first appeared on SmartCompany
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The Franchise Council of Australia will tomorrow discuss a voluntary code of conduct for retail landlords and tenants, but the Shopping Centre Council is strongly opposed to the idea. The FCA will host a forum in Sydney tomorrow, which will centre around discussions on a range of issues including a proposed retail tenancy code of conduct. Other proposals include a payroll tax freeze, and government assistance for small business and occupation health and safety. “[The event] is not intended to be a wailing wall. Those attending... are looking at ways for small business to be more successful,” FCA executive director Steve Wright says. Retail tenancy code of conduct Last year, the FCA put the focus on retail tenancy. It began working on a draft document and has called for industry support for the concept. Wright says the code is designed to stem conflict between landlords and tenants about rental increases, end-of-term arrangements, fit-out requirements and abuse of market power. But the Shopping Centre Council, which represents big retail landlords, opposes the code. It wants existing state and territory regulations to be aligned under a single set of national laws. While the SCC has stated its opposition to the code, the FCA remains hopeful an agreement can be reached, particularly if it leads to harmonisation of retail tenancy laws across the country. The guidelines are designed to give retailers confidence about security of tenure, and are particularly relevant given poor occupancy rates in North American shopping malls, Wright says. The SCC has been invited to participate in the forum, but has labelled the proposed code as a “media stunt” and has told the FCA it will not discuss the matter. Other issues to be discussed at the forum include: Government assistance The discussion about government assistance will centre on the model adopted by the United States Small Business Administration. Since its founding in 1953, the SBA has delivered about 20 million loans and loan guarantees to small businesses. “The FCA is not intending to ask government to be a lender,” Wright says. “It is asking it to make use of an unused bank wholesale funding guarantee to provide a guarantee to business start-ups which lack a guarantor and who would otherwise get a bank loan if they had a guarantor.” Payroll tax freeze The concept of a payroll tax freeze will also be discussed at the forum. “The FCA is not asking for a reduction of payroll tax. It is asking only for a freeze so that payroll tax bills paid by employers do not get any bigger,” Wright says. “A freeze would remove any ‘threshold creeps’, which can be a disincentive to employ new workers as the new employment may take a business above the threshold.” “[The business would] therefore incur the tax or even be dragged into paying payroll tax simply by granting a pay rise to employees, in order to keep them.”
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