Minister's silence angers franchisees

…the Federal Government appears to be doing nothing to usher in much-hyped reforms to the $128-billion-a-year industry. The recent collapse of kitchen and laundry appliance franchise Kleenmaid is likely to cost consumers $27 million in lost deposits, as well as many of its 150 staff their jobs. About 2800 trade creditors are owed $12 million.
April 14, 2009

Minister's silence angers franchisees
The company has four WA stores among 20 nationwide.
Chalpat Sonti

As yet another national franchise bites the dust, those at the coalface are angry the Federal Government appears to be doing nothing to usher in much-hyped reforms to the $128-billion-a-year industry.

The recent collapse of kitchen and laundry appliance franchise Kleenmaid is likely to cost consumers $27 million in lost deposits, as well as many of its 150 staff their jobs. About 2800 trade creditors are owed $12 million.

The company has four WA stores among 20 nationwide.

It adds to a tale of woe for the sector, with once-household names such as Midas, Kleins, Ezy DVD and Strathfield all going into administration in recent months.

Franchisees are among those left out-of-pocket by the collapse of their parent companies, and many are irate the Federal Government has yet to move on a joint parliamentary committee's recommendations for reform of the franchising code of conduct.

Those 11 recommendations sit with small business minister Craig Emerson, having been tabled in Parliament in early December.

They include more powers for the Australian Competition and Consumer Commission to investigate suspected breaches of the code, better disclosure from franchisors, looking for a better way to balance the rights of franchisors and franchisees if the former failed and possibly amending the Trade Practices Act to include monetary penalties for code breaches.

While the recommendations met with a mixed response from those involved in the industry, they did receive bipartisan support in Parliament.

However, the Government has yet to make public its progress in implementing the recommendations, other than to tell it is "considering them… and will respond in due course". understands it has met with the ACCC.

Dr Emerson's office has not responded to requests from about the status of the discussions with the ACCC or when there might be public input on the code.

And frustrated franchisees - whose complaints first sparked the parliamentary inquiry into the code - have fared little better.

Perth-based Narelle Walter, a former Bakers Delight franchisee who claims that company induced a breach of contract on stores she owned in Karrinyup and Belridge at a cost of more than $5 million, said Dr Emerson had ignored franchisee concerns.

"We can't get in to see him and we have heard nothing on what he is doing to implement the … recommendations," Ms Walter said.

"(Dr) Emerson's silence in recent months is a real turnaround from his days in Opposition. (He) was quite enthusiastic to meet us when in Opposition but now as minister he is nowhere to be seen on franchising issues."

Deanne de Leeuw, a NSW former Bakers Delight franchisee, said it was unfair franchisor representatives had been able to meet Dr Emerson.

"We are concerned that the minister is only getting a franchisor's perspective on the issues and not the full picture," Ms de Leeuw said.

"Franchisees are losing their businesses through the unethical practice of some franchisors and the minister needs to hear that for himself."

The inquiry's recommendations were supported by both sides of politics and were consistent with findings in state inquiries in WA and South Australia, Ms de Leeuw said.

"Put these facts together and franchisees are disappointed that the minister is taking so long to implement the recommendations."

Franchising expert Frank Zumbo, an associate professor at the University of NSW, said it was "very disappointing" Dr Emerson had not responded to the recommendations promptly, and equally so that it appeared there was no public consultation in place to seek responses to them.

"While it would be expected that (Dr Emerson) would consult internally with such bodies as the ACCC, such consultation should be ongoing in any case and should not prevent the minister from moving quickly to a public consultative process," Mr Zumbo said.

Dr Emerson's "failure" in responding to the recommendations had created a "policy vacuum" which raised serious concerns about his commitment to reform.

"The franchising sector deserves better as it is a significant contributor to the economy," Mr Zumbo said.

Two recommendations which needed to be implemented as soon as possible were the statutory duty of good faith between franchisors and franchisees and monetary penalties for breaches of the code.

Brought to you by

Risks: Franchisor insolvency, intentional, Australian Competition and Consumer Commission, ACCC, Beggars can't be choosers: take what you're given and shut up, Blocking for the industry, Breach of contract, Confidence game, Deanne de Leeuw, Delay costs economy millions and millions, Deposit money not refunded, Dog and Pony show, Externalities: cheap business decision when someone else pays, Federal insolvency laws used to shirk legal claims, Franchisor fails and consumers lose millions, Franchisors want the minimum regulation they can get away with, Good faith + fair dealings = false hope, Government as system’s ultimate liar, Government inquiries into franchise abuse allegations, Cruellest lies are often told in silence, Insolvency, Illusion of government oversight, McKangaroo Court, McLaw: toothless legislation designed to protect the dominant parties, Modern franchising is fundamentally undemocratic, Money swears, No real penalties for abuse of federal insolvency laws, On Cooling the Mark Out (Erving Goffman), Opinions at odds with the Minister, Petition parliament to censure Minister, Political contributions by franchisors (v. franchisees), Politicians helping their friends, Politicians refuses to answer request for information, Power corrupts and absolute power corrupts absolutely, Policy stall gives appearance of some progress, Regulatory capture breeds its own incompetence, Take what you're given for a law or you get nothing, The Fixer scoops the floaters out of the pool, Uncharacteristically shy with media requests, Undue influence, Unfaithful servants, When the franchisor tanks, so does the franchisee, Why should we care? It's not our money., Universities provide unbiased expert knowledge and pursue objective truth, Australia, 20090414 Ministers silence

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License