Minister needs to address franchising

We need a great debate on franchising. We need an objective, national inquiry. We need to determine the extent of any problem in franchisees getting justice and, if it exists, we need a better system to deliver that justice.
January 8, 2008

Minister needs to address franchising
Peter Switzer

THERE has been a festering sore on the rear end of small business for far too long, and Labor's new Minister for Small Business, Craig Emerson, could do a lot to heal the ailment.

Maybe Washington should be the Minister's source of inspiration. Not George Bush's Washington DC but Hollywood's Denzel Washington - more on this later.

After over 20 years of reporting, analysing and working in the small business area, my conclusion is that many Australians think franchising is in need of an objective health check.

Though the industry has been a wonderful story of achievement, the euphoria of the sector's achievements has meant a number of casualties strewn along the road of success have been ignored.

Now that all of us, including minister Emerson, are pondering our New Year's resolutions, it's time for something to be done to address franchisees' criticisms of franchisors.

Last week the peak franchising sector representative group, the Franchise Council of Australia, announced that communications industry executive and consultant Steve Wright had been appointed to head this important body.

Wright is a professional with a good corporate reputation. But is he really up to the task ahead?

The FCA chairman John O'Brien pointed to his experience in industry advocacy and stakeholder relations, including government relations, on the national level over the past 15 years.

"In Steve, we have secured a high calibre candidate from a strong field of applicants, with well-rounded skills to help take us to the next level of professionalism, representation and member service delivery," O'Brien says.

No disrespect intended, but the FCA has always been good at industry advocacy and government relations.

Its one weak spot has been stakeholder relations when it comes to a small group of franchisees - those who think they are being screwed by their franchisor.

This will be testing material for our two new chums - Steve Wright and Craig Emerson.

They have an opportunity to greatly improve the reputation of franchising, as well as the lives of a small but significant number of long-suffering franchisees in a limited number of franchise systems.

In the interests of non-sensational reporting, note the key words above - "limited number".

Before looking at this embattled and poorly treated group, let's understand the importance of franchising.

Franchising contributes $128 billion to the Australian economy and is responsible for 14 per cent of gross domestic product. In addition, franchisees employ about 600,000 Australians in more than 72,000 workplaces.

This number gives us a clue about how many franchise operations are out there, but there are actually fewer franchisees, since many entrepreneurial types buy more than one franchise.

But not everyone is happy. No one knows how many franchisees are in dispute because some franchisees grin and bear ordinary treatment. However, even if 1 per cent had serious complaints, that would mean more than 500 franchisees could be in need of a fair hearing.

Even if we halve this number to 250 franchisees, then 250 families are being put under unfair pressure, with poor dispute resolution processes. It appears to many as a lopsided system and stacked in favour of franchisors.

I have seen appalling cases of mistreatment of franchisees by a small number of franchisors.

The federal Government, the Australian Competition and Consumer Commission, some of our banks and the FCA have not done themselves proud.

A woman by the name of Cher Borradale, who had a bad experience with her franchisor, has tapped into the internet to email the politicians, members of the media and anyone with some influence, begging for help to assist struggling franchisees. Her personal franchise battle is over but she champions the cause of others. Some people in high places and in the media think she is over the top - even mad. She is angry - and does not want to take any more. Unlike others she can't ignore the people who have lost marriages, wealth and even their lives because of a drama with franchising.

Let me state something I always say when criticising franchising - I am a fan of franchising but it does not mean I can ignore a substantial weak spot. And this is where Denzel Washington comes in.

Last year in LA I was invited to an advance screening of Washington's new film - The Great Debaters. He starred in and directed the film and he turned up to the Writers Guild of America theatre to discuss the film with the audience.

(And yes, I am name-dropping big time, but it is relevant.)

In talking about his approach to filmmaking, Washington said he looked at the specifics or detail to ensure the general or universal ended up being right. We have ignored the devil in franchising's detail and it is not as good as it could be.

The Great Debaters is about an African American college debating team that went undefeated and wound up beating Harvard in the 1930s. It is about one man taking on injustice and discrimination and achieving something substantial.

It is about society complacently ignoring the suffering of fellow citizens and how we can achieve great things if we confront the truth - even the ugly stuff - and do something about it.

We need a great debate on franchising. We need an objective, national inquiry. We need to determine the extent of any problem in franchisees getting justice and, if it exists, we need a better system to deliver that justice.

Good luck Steve and Craig - and a Happy New Year.

Peter Switzer is a founding director of Switzer Business Coaching

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