'Take a cold shower and settle down': Zumbo

"Any franchisor that's already fully complying with the franchising code has nothing to fear. That's a point conveniently forgotten by opponents." Contrary to the "misinformed commentary" of the FCA, both the WA and South Australian bills had gone through a lengthy drafting process involving parliamentary counsel, Mr Zumbo said.

November 11, 2010

'Take a cold shower and settle down': Zumbo
Chalpat Sonti

The behind-the-scenes battle to change the franchising law in WA has heated up, with claims it is designed to favour the nation's most prominent franchisee and counterclaims of "self-serving scaremongering" to try to defeat it.

If passed, a Bill before Parliament will enable franchisors who break the law to be fined up to $100,000, and also includes a statutory definition of good faith.

It is similar to a law currently before the South Australian Parliament. Both proposals stem from the failure of the federal government to include the two provisions in their review of the national franchising code of conduct, despite support from all sides of politics for the change.

Many of the most prominent battles that have led to the push for new laws have involved WA franchisees, including the battle between Bakers Delight and its franchisees, the Lenard's chicken chain and its murderous master franchisee, and the 12-year fight that former Auto Masters franchisee Dave Coombes has had trying to get justice.

The Franchise Council of Australia has sent all WA MPs a nine-page submission opposing the state Bill.

It claims to have gathered "hundreds of signatures" from franchisors, franchisees and suppliers in petitions against both the WA and South Australian proposals.

"Let's hope a few more (WA MPs) now take the time to actually look at the detail of what is being proposed and reassess their position," executive director Steve Wright said.

The FCA submission claims most of the changes are designed to favour the franchisee of Hungry Jack's and KFC, Jack Cowin, who has been involved in a dispute with international KFC franchisor Yum Foods.

"The nub of the matter is that (Competitive Foods, Mr Cowin's holding company) needs the law changed so it can sue Yum," the submission says.

It also claims the Bill contradicts and overrides the federal Trade Practices Act and state Fair Trading Acts.

The FCA claims the South Australian Bill was thrown out, although the state's small business minister has decided to introduce legislation which is likely to be based on the original private member's Bill.

It also claims the decision to introduce the WA legislation as a private members Bill was done to try to get a law passed without proper scrutiny.

Queensland-based franchising lawyer Simon Young said the WA Bill contained proposals that were contrary to well-established legal principles.

"It leaves me dumbfounded," he said.

"Further reforms to the dispute resolution processes are definitely required, but this Bill goes beyond what is necessary and enters into uncharted legal territory, risking businesses and jobs at a time we can least afford."

However, the issue would not go away.

"The federal government appears to be playing a dangerous game of brinkmanship with the state franchising reforms but the risks and consequences will be solely borne by thousands of small businesses. This Bill is not the answer but it reflects the frustration of the process to date."

The Queensland Law Society says it has also raised concerns with WA MPs, claiming the Bill could increase personal injury claims by allowing retrospective action by anyone suffering harm as a result of a contravention of the law.

Tony Conagahan, franchising partner at DLA Phillips Fox, said there was no need for additional state legislation in either WA or South Australia.

"If the legislation is passed, it would act as a disincentive to franchisors to open operations in those states because of the increased risk and compliance costs of managing different pieces of legislation," he said.

But Frank Zumbo, the University of NSW associate professor who drafted both the WA and South Australian Bills, said both were consistent with the best business practice in the sector.

"The FCA and those franchisors making hysterical claims about the Bills should take a cold shower and settle down," he said.

"They will not see the end of freedom of contract and will not bring down the franchising sector. Such claims are baseless… self-serving scaremongering."

The FCA had also opposed the original federal code of conduct in the 1990s, and was using the same claims now as it did then.

"Any franchisor that's already fully complying with the franchising code has nothing to fear. That's a point conveniently forgotten by opponents."

Contrary to the "misinformed commentary" of the FCA, both the WA and South Australian bills had gone through a lengthy drafting process involving parliamentary counsel, Mr Zumbo said.

"Good WA franchisors should be excited by the Bill as giving them a marketing advantage over interstate rivals. They can rightly say that it provides all those dealing with a WA franchisor with legal confidence that the franchisor fully complies with the franchising code and does the ethical thing by their franchisees."

The Bill was backed by the findings of inquiries in the WA, South Australian, and federal parliaments.

"Those inquiries found clear and compelling evidence of the damage that rogue franchisors are doing to the sector. The Bills are not about the hidden agendas involving specific franchisors or franchisees but are for the benefit of the sector as a whole."

A survey of franchisors by research company 10 Thousand Feet, released today, showed that one in two franchisors had been involved in disputes with franchisees in the past two years.

Of those, about 34 per cent went to mediation, and 17 per cent to court.

It found "rogue franchisors" were giving the industry a bad name. The FCA has disputed the notion of rogue franchisors being advanced as a reason for both the WA and South Australian Bills.

The survey, of 81 franchisors nationally, found while the majority complied with most aspects of the federal code, 15 per cent did not let prospective franchisees know how far in advance of the end of the franchise agreement that talks would start to renew or terminate it, and 23 per cent had not informed franchisees that unilateral changes could be made to operations manuals during the course of their agreement.


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Risks: Abuse of business, regulatory & political authority can destroy people, Appropriate franchise law, Australian state franchise legislation, 2010, Beggars can't be choosers: take what you're given and shut up , Bullying, Confidence game, Contempt for democracy, Dispute resolution means franchisee goes broke, Fear mongering, Fear mongering to clients increases industry fee market, Franchise Council of Australia, FCA, Franchisor association not trusted by politicians, Franchisor association not trusted by professional journalists, Franchisor association public relations machine, Franchisors want the minimum regulation they can get away with, Good faith, fair dealings, Hidden agenda, Money swears, No love lost, apparently, No numbers to back up dire predictions, 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, 20101111 Take a

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