Commissioner hired to protect small firms from 'franchise bullies'

Mr Koutsantonis, who chaired a parliamentary inquiry into franchising in 2008, said franchisees often were terrified of speaking out on the record because they were being forced by the franchisor to buy stock at market rates or were locked into tenancy agreements they could not afford. He said South Australia was the largest small business state in the federation, and many were franchises like Jim's Mowing, KFC, McDonald's and Baker's Delight. "These franchisees often have the odds stacked against them," he said.

The Advertiser
October 1, 2010

Commissioner hired to protect small firms from 'franchise bullies'
Greg Kelton

OPERATORS of franchises, including fast-food outlets, gardening operations and baking, will be given new protection from coercion and unfair business dealings by their often large parent companies.

A Small Business Commissioner will be appointed by the South Australian Government.

His main task will be to protect those who hold franchises.

This would be from outlets such as KFC, McDonald's, Hungry Jack's, Baker's Delight, Michel's and Jim's Mowing.

The move, announced by Small Business Minister Tom Koutsantonis, will cover more than 135,000 small businesses in South Australia.

"What we are trying to do is empower franchisees for the first time in the history of franchising in Australia," he said.

"Good faith dealings and unconscionable conduct will be put into law in SA and for the first time, if people act without good faith the franchisee will have a way of address through the laws.

"If a franchisee is being bullied, is being coerced, because of a contract they have signed, now they will have some redress."

Mr Koutsantonis said a draft Bill would be released for consultation by the end of the year and he hoped to have legislation passed by Parliament early next year.

He said he was trying to even the playing field for small businesses.

"Central to this will be a regulatory framework that results in laws against unconscionable conduct and unfair contract terms," he said.

"We will also require that good faith and fair dealing be upheld as a theme that should be adopted by both parties during all franchising negotiations.

"A franchisee is often vulnerable to unfair terms when they first sign up. By legislating to ensure parties negotiate in good faith and do not engage in unconscionable conduct, the weaker party will be significantly empowered, holding the stronger party to account at all stages of negotiations."

Mr Koutsantonis, who chaired a parliamentary inquiry into franchising in 2008, said franchisees often were terrified of speaking out on the record because they were being forced by the franchisor to buy stock at market rates or were locked into tenancy agreements they could not afford.

He said South Australia was the largest small business state in the federation, and many were franchises like Jim's Mowing, KFC, McDonald's and Baker's Delight.

"These franchisees often have the odds stacked against them," he said.

Mr Koutsantonis said while he was chairman of Parliament's Economic and Finance Committee and as a local MP and now as a minister, he had received hundreds of complaints.

"What franchisees are seeing is despair, a lot of them have no redress," he said. "People in small business are time poor and cash flow poor. They don't have time to get redress through the courts - they usually just cop it."

Mr Koutsantonis said the Small Business Commissioner would have the ability to mediate and act on behalf of the franchisees. He said the commissioner's functions would include:

• MONITORING the fair treatment of small businesses in their commercial dealings with other businesses in the workplace.

• RECEIVING and investigating complaints by small businesses regarding unfair market practices.

• MEDIATING between parties and mediating retail tenancy disputes between businesses and landlords.

Mr Koutsantonis said small businesses in SA made up 96 per cent of all private sector business in the state.

As master franchisor for South Australian coffee chain Bean Bar, Ron Basset knows the importance of good relationships with franchisees.

Mr Basset said he had no problem, in principle, with proposed changes to state franchising laws, but he was concerned about the potential increase in costs for franchisors and potential franchisees.

"They (the State Government) want to know what franchisors are going to spend money on in the next five years," he said. "The cost of having to complete more disclosure (paperwork) and keeping records up-to-date will rise. Previously, it has been hard to do that and now it's going to be even harder."

He expected changes would help weed out "sharks" in the industry. "A lot of franchisors were not renewing franchise agreements and would then go and sell the site to someone else," he said.

"The biggest franchisors will prosper from changes because they can handle the additional workload. I can't see the smaller ones lasting."

http://www.adelaidenow.com.au/news/south-australia/protection-for-smaller-firms/story-e6frea83-1225932554448


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