Classic federal-state battle reaching ultimate showdown

Some of the more noteworthy were the battle between Bakers Delight and its franchisees – which started getting politicians interested – the Lenard's chicken chain and its murderous master franchisee, the unravelling of the formerly pristine image of Australia's second-largest franchise Jim's Group (whose founder Jim Penman vociferously came out in support of franchisee rights), and perhaps the most poignant of all, the 12-year fight that former Auto Masters franchisee Dave Coombes has had – and is still having - to try to get justice.

http://www.nationaltimes.com.au
November 10, 2010

Classic federal-state battle reaching ultimate showdown
Chalpat Conti

A long and fascinating fight could leave Canberra with little choice as the states move to check mate. And it all turns on the growing list of stoushes about franchise operations.

There's usually little but bluster when state politicians talk about Canberra. Politicians playing to their home audiences, expecting only a few good soundbites.

The same goes for when the little guy takes on the big one. A lot of early fight, before being worn down by superior resources rather than superior argument.

But there's a sign that things might change.

Largely away from the public eye, there has been an intriguing battle going on. State against federal, mate against mate even, and this time it could be a whole lot different.

The centre of this battle is the $130 billion-a-year franchising industry, involving some of the nation's (and the world's) best known brand names in a battle that until last year was all too one-sided.

Frustrated for years about a seeming lack of negotiating or any other power, franchisees weren't getting anywhere with their attempts to tighten the industry's code of conduct.

There are those franchises that have gone under, like Midas and Kleenmaid, which have hit the headlines, but these reforms aren't about them.

The list of franchise stoushes is too long to list here.

They are to do with the everyday cut-and-thrust of business.

Some of the more noteworthy were the battle between Bakers Delight and its franchisees – which started getting politicians interested – the Lenard's chicken chain and its murderous master franchisee, the unravelling of the formerly pristine image of Australia's second-largest franchise Jim's Group (whose founder Jim Penman vociferously came out in support of franchisee rights), and perhaps the most poignant of all, the 12-year fight that former Auto Masters franchisee Dave Coombes has had – and is still having - to try to get justice.

Apart from the occasional pollie, nothing much was done. But it was the nation's best known franchisee "Hungry Jack" Cowin, who got the ball rolling with firstly a state inquiry in WA, and then more importantly a federal one, while over in South Australia, a similar inquiry was held.

Cowin's beef was with end-of-term arrangements. Faced with losing KFC franchises, he went the political route unavailable to the thousands of Mums and Dads whose battles cost them everything.

He has kept a lower profile in recent times, but has quietly supported other franchisee battles. And being one of the few franchisees with any significant financial and political muscle, has helped ensure that the powers-that-be know that the issue won't go away in a hurry.

All three inquiries recommended pretty much the same thing, including monetary penalties for breaches of the franchising code of conduct, and a statutory definition of good faith.

A federal government – backed by an inquiry which had wide bipartisan support – squibbed on those two last year.

Its consultation was largely with the franchisor side of the equation, such as the Franchise Council of Australia, and its changes to the code showed it.

Howls of protest from the likes of long-time franchisee advocates such as Liberal MPS Joanna Gash and Don Randall, and indeed the inquiry chairman Labor MP Bernie Ripoll, fell on deaf ears.

Both former responsible minister, the reluctant Craig Emerson, and his successor Nick Sherry then pleaded for a three-year period to see how the changes worked, before any further tinkering could be considered.

It was a smack in the face for franchisees, who saw their once-high hopes shrivelling.

Then up stepped the man who has turned out to be the key player in the whole saga, little-known South Australian state Labor MP Tony Piccolo.

Taking a stand against his federal colleagues, last year he introduced a private members Bill - drafted by respected academic and franchising expert Frank Zumbo - to his state parliament recommending what Canberra wouldn't.

Piccolo made no bones about where he stood. It was with franchisees, and even though he conceded a state-based law for a national industry wasn't ideal, it was the only way to get the change he wanted.

But further progress was halted as South Australia went to the polls. In an election in which many tipped Piccolo to lose his seat, both he and the government were returned.

His Bill passed to Small Business Minister Tom Koutsantonis, and while it's still in its preliminary stages, there is every indication it will become law.

The action then moved to WA, where there has also been progress with a Liberal-sponsored Bill, which - like the terms of reference for its inquiry - has had more than the hand of Jack in it, though as in South Australia Zumbo drafted much of it.

It also appears certain that a law here will be passed, and Queensland is likely to be next.

If that gets up, the roar from emboldened franchisees in NSW and Victoria will only get louder.

Unlike the federal changes, franchisees have been front and centre of the state proposals. The Franchise Council of Australia has been shut out to date.

While it claims the laws will make WA and South Australia no-go zones, the reality is that franchising is a confidence business (some might say it's been a confidence trick up until now).

Why wouldn't good franchisors want to set up in states where prospects are confident enough to invest their money and feel protected?

Many franchisees run into problems that could have been resolved with a bit of due diligence beforehand. Not the starry-eyed kind, familiar to anyone who's ever made a large financial commitment, but some proper research.

But in some of the cases I've outlined above, the rules changed afterwards. Usually unilaterally. With a "take it or leave it or we'll see you in court where we've got a lot more money than you" mentality.

Those battles, and others, haven't generally been resolved to the satisfaction of both parties. Yet thanks to a politician, an academic and small franchisees who wouldn't quit, and then a hungry Jack, it looks as though the states have finally got within a bulls roar of forcing their federal cousins to act.

Over to you, Nick.

http://www.nationaltimes.com.au/opinion/politics/classic-federalstate-battle-reaching-ultimate-showdown-20101109-17llo.html


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Risks: Abuse of business, regulatory & political authority can destroy people, Australian state franchise legislation, 2010, Beggars can't be choosers: take what you're given and shut up , Bullying, Churning (serial reselling), Confidence game, Contempt for democracy, Dispute resolution means franchisee goes broke, Franchise Council of Australia, FCA, Franchisors want the minimum regulation they can get away with, Good faith, fair dealings, Hidden agenda, Money swears, Private Members’ Bill, Risk much higher for franchisee than independent business, Trade association fronts and defends best and worst franchisors, Trade association membership a bogus "Good Housekeeping Seal of Approval", Trade association tells elected officials how to do their job, Undue influence, War of attrition, Australia, 20101110 Classic federal

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