Stakes raised in franchising saga

The FCA opposes most of the recommendations but Mr Penman said that stance was "just total garbage". He wanted franchisee advocates and major franchisors to jointly push for reforms, including affordable dispute resolution for franchisees, defined penalties for breaches of the code, an independent body which could hold information on franchises, and automatic right-of-renewal when franchise agreements expired.

http://www.smh.com.au
September 14, 2009

Stakes raised in franchising saga
Chalpat Sonti

As pressure grows from within Labor ranks for the Federal Government to do something about the problems plaguing one of Australia's largest industries, one of the biggest players in the business has broken ranks to support reforms.

Jim Penman, the man behind the worldwide Jim's Group of franchises covering everything from lawnmowing to computer services, says even though the present system helps him, franchisees need a level playing field and it is time large franchisors stood up to be counted.

His comments come as the South Australian parliament moved a step closer to franchising laws for the state after unanimously passing a motion moved by Labor MP Tony Piccolo last week.

And Mr Piccolo believes his Labor colleagues in other states could also act if nothing is done nationally.

The South Australian motion was moved in frustration over Mr Piccolo's federal counterparts' seeming inaction in implementing the recommendations of a parliamentary inquiry into the franchising code of conduct.

Among that inquiry's conclusions, which were tabled in Canberra in December last year, were a requirement for "good faith" negotiations between franchisors and franchisees, monetary penalties for breaches of the code, and greater powers for the Australian Competition and Consumer Commission to investigate suspected infringements.

Many observers of the $128-billion-a-year industry have been frustrated at a seeming lack of progress since the inquiry, as several high-profile franchises - such as Midas, Kleenmaid and Ezy DVD have collapsed in recent months.

In May, WAtoday.com.au revealed a rift developing between state and federal Labor, as Mr Piccolo ramped up the pressure by threatening to introduce state laws, even though he, and most others, believe federal legislation would be more effective.

Federal small business minister Craig Emerson released an "options paper" in response, inviting comment on the recommendations and a promise for a Government response by the end of July.

But as the July deadline has come and gone, with no response in sight, frustration has continued to grow. Mr Penman broke ranks with the major organisation representing franchisors, the Franchise Council of Australia, when he told WAtoday.com.au that it was time for major franchisors to stand up for "what was right".

The FCA opposes most of the recommendations but Mr Penman said that stance was "just total garbage".

He wanted franchisee advocates and major franchisors to jointly push for reforms, including affordable dispute resolution for franchisees, defined penalties for breaches of the code, an independent body which could hold information on franchises, and automatic right-of-renewal when franchise agreements expired.

While Mr Penman - who has battled disaffected franchisees - admitted expressing such sentiments would be "good PR from a franchisor's point of view" he said franchisees were being denied a fair go.

"The law is pathetically weak," he said.

"I'm in an incredibly strong position, where the legal process is so cumbersome and expensive that franchisees, especially in service industries like ours, can't afford to fight as they get buried under the costs. They need access to an affordable where they can be treated fairly.

"Generally speaking, Australians are going to like the idea of protecting the weak against the strong. It's time some of the strong in our industry say this won't hurt our industry but will help it."

Mr Piccolo - who earlier blasted the options paper - told WAtoday.com.au that if nothing meaningful came from the Federal Government by December, South Australia would go ahead with its own laws.

The Federal inquiry followed state inquiries in WA and South Australia.

"Once we break ranks, I think some other states, like Queensland, might go that way as well," he said.

"Once we've got other states doing it, it makes federal stuff almost impossible. It'd be better if we had federal laws but I'm not prepared to keep waiting."

Australia's franchising laws were "real banana republic stuff", Mr Piccolo said.

"There are probably better laws to protect Third World states than here."

His comments were backed by franchising expert Frank Zumbo, an associate professor of business law at the University of NSW, who said there was bipartisan political support for reform and Dr Emerson needed to show leadership.

"(Dr) Emerson's failure to implement the recommendations is creating a policy vacuum and Mr Piccolo's motion makes it clear that the policy vacuum at a Federal level could easily be filled by state legislation," Mr Zumbo said.

The onus was now on Dr Emerson to remove the uncertainty and implement the recommendations of the inquiry.

"The sector needs federal leadership on franchising reforms, but if it's not going to get the needed changes federally then state legislation can fill the gaps in the regulatory framework."

A spokesman for Dr Emerson said while a national solution was the "appropriate" one, any state laws were a decision for governments in those jurisdictions.

The Federal Government would not be rushed into framing its response on a complex issue, even though "it's taking a bit longer than we anticipated", the spokesman said.

"We've got a lot of detailed submissions to go through and it's really important we get this right," the spokesman said.

"Hopefully we get something that's in the best interests of franchisors and franchisees."

http://www.smh.com.au/small-business/franchising/stakes-raised-in-franchising-saga-20090914-fmvp.html


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