The federal government will pick up where the former Labor government left off when it comes to reviewing the franchise sector, with the potential for penalties of up to $50,000 for breaches of the Franchising Code of Conduct. Small Business Minister Bruce Billson told SmartCompany this morning “the Coalition advocate penalties to help enforcement of the code”. In 2013, the Wein review of the Franchising Code of Conduct made 18 recommendations to update it, which were not implemented due to the federal election. “We welcome the Wein recommendations, after urging the previous government to take action on the code for many years,” Billson says. Billson says the federal government wants to ensure that franchisors who breach the code face consequences; that franchisees which are harmed have the resources to seek remedy; and that there is a nationally consistent regulatory framework rather than a fragmented state-by-state approach. The franchise sector has been regulated by the compulsory code since 1998, but to date it does not include penalties for breaches. Billson says the Coalition is “working as we speak” to ensure that changes are made, with a regulatory impact process expected to be completed by mid-year. He says the potential fines of $50,000 will be for “serious but less egregious” breaches of the code, while there will still be full legal avenues and major fines for those found to be conducting “egregious” breaches. Billson says the aim is to ensure a level playing field for franchisor and franchisee. Franchise Advisory Centre principal Jason Gehrke told SmartCompany penalties are less about the treatment of franchisees, and more of a matter of adhering to the code. For example, Gehrke says if a franchisor fails to give a disclosure document, a fine could be relevant. “What would be a concern is the extent of the fine and the cause of the penalties – if it is an innocent or insignificant breach, a fine could be disproportionate,” he says. “If they are required to provide a list of franchisees, and that list doesn’t include the franchisees that just joined the network, or if there are franchises in a state of transition, with one being sold to another, that inaccuracy could result in a fine.” Gehrke says most franchisors won’t be worried about the potential of penalties, as most adhere to the legislative requirements implemented in 1998. “Most are not concerned about fines, providing the extent of the fines or penalties are limited, clear and unambiguous,” he says. Gehrke says that as part of the Coalition’s pre-election policies, it also promised to take a “root and branch” review of the competition law policies. “Anything from the Wein inquiry that is adopted, they would want to make consistent with the competition law reviews,” he says. This article first appeared on SmartCompany.
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
Carl's Jr is set to launch in Australia with the American burger chain announcing its intention to open 300 stores in the next 10 to 15 years.
An expert has highlighted some of the challenges of hiring immigrant franchisees, after Retail Food Group said more than 50% of its successful franchisee applicants over the last six months spoke English as a second language.
Retail Food Group says it received more than double the number of enquiries this January compared to January 2012, as enquiries throughout franchising experience an upward trend.
Italian gelato chain RivaReno has chosen Sydney as its first location outside of Italy, opening a store in Sydney’s Darlinghurst, but an expert says it will have to work hard for consumer dollars.
Collins Booksellers has opened a store inside a hospital as part of a new strategy, but experts say other retailers looking to follow suit must be willing to customise their store layout and stock.
Aspiring entrepreneurs have been warned about the deceptive ease of running a vending machine franchise, after a major vending company announced its plan to offer vendor financing and a DIY package.
The new owners of the Grout Pro Australia business have signed contracts with 11 existing franchisees after taking over the business in June 2012 following its liquidation.
The success of mobile franchises often depends on the season, an expert says, after mobile dog grooming service HydroDog Australia underwent a rebrand and launched two new businesses.
An expert says training academies can be an ideal way to educate franchisees without damaging the reputation of the brand, after Retail Food Group revealed details about its training academy.
The appointment of receivers to Pets Paradise this week did not include stores operated by franchisees, but franchising experts warn there are still difficult times ahead for franchisees.
Bedding retailer Snooze has become the latest franchise to offer vendor finance for its franchisees, following in the footsteps of the likes of Baker’s Delight.
Franchisees have been warned that they are personally liable for their actions, in the wake of the Brumby’s carbon tax pricing furore.
A Subway franchisee is in hot water for allegedly underpaying 11 staff by more than $50,000, with an industry expert warning that franchisors should ensure their franchisees receive proper legal information.
A franchisee couple has been awarded $1.22 million in damages after a successful appeal against franchisor Billy Baxter’s, prompting an expert to highlight the importance of site selection.
A franchising expert has issued a warning to prospective franchisees about exclusivity rights, after a former Jim’s Cleaning franchisee claimed he lost exclusivity in his assigned territory.
The franchising sector can expect to see more mergers and acquisitions as smaller franchises struggle to remain profitable, an expert says, after Kleenit acquired competitor Graffiti Gone.
Susphi chain Go Sushi has followed in the footsteps of Bakers Delight, extending its Manage to Own program, which allows more than 75% of start-up costs to be paid over three to five years.
Mobile food franchise Tasty Trucks plans to invest $2 million into the business this year and increase its fleet of vans, following the acquisition of Newcastle-based business Lunch Express.