Sparks fly in franchise debate

"It is not only the Opposition calling for urgent action, members on the government side are also calling for action," she said. Dr Emerson has met with franchisor representative group the Franchise Council of Australia, but not with franchisees, in the wake of the report. That has led franchisees, who are not represented by a group of their own, to fear Dr Emerson will water down or discard some of the proposals, such as the good faith requirement, under pressure from franchisors.

http://www.theage.com.au
August 20, 2009

Sparks fly in franchise debate
Chalpat Sonti

As recommendations to reform one of Australia's largest, and most troubled, industries move at a snail's pace, MPs from both sides of the political divide have re-ignited deep wounds.

Almost nine months have passed since a joint parliamentary committee produced a report on reforms to the franchising code of conduct. In that time several high-profile franchises have gone to the wall, including Midas, Kleenmaid, Strathfield and Ezy DVD.

The report followed evidence of widespread dissatisfaction from franchisees within the $128-billion-a-year industry and followed state inquiries in WA and South Australia.

Its recommendations, backed by both sides of politics, included the provision of a "good faith" clause in negotiations between franchisors and franchisees, greater powers for the Australian Competition and Consumer Commission to investigate breaches of the code, and monetary penalties for those found to be in breach.

The delay by federal small business minister Craig Emerson in implementing the reforms has led to even greater dissatisfaction within the industry as franchise failures occurred.

After WAtoday.com.au exposed growing rifts within the Labor Party over the delay, and the prospect of unwanted state laws, Dr Emerson finally responded in June with the release of an "options paper" seeking comment on the proposed changes.

He indicated the Government would respond to the report by the end of July, but that has been delayed.

That delay was the focus of anger from the Liberals in Federal Parliament this week.

WA-based MP Don Randall called for a fast-tracking of the recommendations.

"At the core of fixing the epidemic problem is the need for the government to strengthen the existing laws relating to franchisors," he said.

"How many times does (Dr) Emerson need to be told?

The insertion of a good faith clause was vital to discourage "opportunistic and unethical conduct".

He pointed to scepticism expressed in WAtoday.com.au by South Australian state Labor MP Tony Piccolo, who labelled his federal colleagues' handling of the issue, and the options paper, as something out of a script of satirical television show The Hollowmen.

"This is not a partisan issue, this is about making sure people get a fair deal," Mr Randall said.

"We cannot ignore the fact that generally in these situations there is one weaker party. The franchisor is often a powerful national company and the franchisee is typically someone trying to make a change in their lives, admittedly sometimes with a minimum of business experience."

Mr Randall was backed by NSW-based MP Joanna Gash, who said "we are looking for leadership on this issue but all we are finding is silence" from Dr Emerson.

"It is not only the Opposition calling for urgent action, members on the government side are also calling for action," she said.

Dr Emerson has met with franchisor representative group the Franchise Council of Australia, but not with franchisees, in the wake of the report.

That has led franchisees, who are not represented by a group of their own, to fear Dr Emerson will water down or discard some of the proposals, such as the good faith requirement, under pressure from franchisors.

But Queensland Labor MP Bernie Ripoll, who chaired the inquiry, told Parliament that he backed the good faith provisions, which seemed recently to have been rejected by the Liberals.

"We need to find a solution for end-of-contract agreements," he said.

"I agree with (Ms Gash) in terms of harsher penalties for those that do the wrong thing - and in the end that is what we're striving to implement."

He disagreed that progress on the inquiry was slow.

"I think we will soon see the fruits of that process and the benefits from giving proper consideration to the situation we are dealing with," Mr Ripoll said.

Mr Randall said Mr Ripoll was "eager to put bullies on notice" when handing down his report, but the issue was now "just another example of the government's preference for spin over substance".

Victorian-based Labor MP Mark Dreyfus said the Liberals had ignored franchising in their small business policy released recently, as well as when in power.

"(Mr Randall) knows very well… that the former government simply failed to act on most of the major problems that arose in this sector," Mr Dreyfus said.

Franchising expert Frank Zumbo, an associate professor of business law at the University of NSW, said he backed Mr Randall and Ms Gash for calling on Dr Emerson to "stop watching and move quickly".

"It's nearly nine months since those bipartisan recommendations were tabled… and Dr Emerson's continued inaction is creating business uncertainty and allowing rogue franchisors to further tarnish the reputation of the franchising sector," he told WAtoday.com.au.

"A statutory duty of good faith and pecuniary penalties for breaches of the franchising code are critical in providing a clear framework in which franchising participants can get on with business."

However, that view is opposed by the Shopping Centre Council of Australia, which in a submission on the options paper has called for the removal of the good faith provision.

"It is a concept, a principle, which is generally impossible to define," executive director Milton Cockburn said.

"It follows from this, since good faith cannot be satisfactorily defined or commonly understood, it is unlikely to result in any change to the business practices of franchisors or franchisees."

Source: watoday.com.au

http://www.theage.com.au/small-business/franchising/sparks-fly-in-franchise-debate-20090820-erfi.html


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