Hungry Jack comes out swinging on franchise law

"But there's no smoke without fire in a lot of these disputes. There's obviously some need for protection. "The pendulum swung too far one way and now it's swinging back." Mr Sherlock backed Mr Cowin's comments, saying the matter should be left to parliamentarians. "They know what they're doing," he said.
November 18, 2010

Hungry Jack comes out swinging on franchise law
Chalpat Sonti

Australia's best-known franchisee has slammed what he calls a "shameful" campaign to try to prevent a franchising law in WA.

Jack Cowin, the chairman of Competitive Foods Australia, claimed the WA MP who proposed the franchising Bill had been "bullied" and personally threatened by the Franchise Council of Australia.

It is the latest in a war of words that have broken out between the Bill's opponents and supporters.

Competitive Foods runs KFC and Hungry Jacks stores under franchise in Australia.

The FCA - which opposes the Bill - earlier accused Competitive Foods of seeking to get the law changed so it could sue Yum International, the KFC franchisor with which Competitive Foods has been involved in a long-running dispute.

That dispute relates to the closure of KFC stores after accusations of what Competitive Foods describes as "churning" - where a franchisor forces a franchisee out then re-sells the store at a profit.

The FCA has also questioned Liberal MP Peter Abetz, who introduced the Bill, as having "no relevant experience in franchising and no legal background", and the standing of the man who drafted it, NSW academic Frank Zumbo.

"It is not clear who he (Mr Zumbo) is representing - himself, (his university) or some other party," executive director Steve Wright said.

Mr Zumbo slammed those remarks as nonsense, and called on the FCA to reveal its own agenda.

"It's un-Australian to attack the player, and not the ball," he said.

Mr Cowin said his company was "comfortable to stand on our reputation" and was - in the absence of a strong franchisee representative body - in the position of a franchisee defender.

The campaign against Mr Abetz by FCA members was "nothing short of shameful", he said.

In a letter to Premier Colin Barnett, Mr Cowin returned fire at the FCA, criticising board member Stephen Giles, who has been lobbying WA MPs.

Mr Giles, a Melbourne-based partner with law firm Norton Rose, lists Yum as one of his clients in a profile on his company website.

The Bill is expected to be referred to Parliament's economics and industry standing committee today, amid a report some Liberal MPs will not back legislation introduced by colleague Mr Abetz.

"It seems that private Liberal Party room discussion has been leaked to the media by someone aligned to the FCA with the intention of bullying Mr Abetz into bowing to the FCA's demands to withdraw this legislation," he said.

"The fact is that Mr Abetz's Bill is based upon the conclusions of bipartisan parliamentary inquiries in South Australia and federally.

"Mr Abetz must be acknowledged for both his courage and integrity in championing the cause of franchisees, and I would hope supported by Members of Parliament in the face of the FCA's arrogant contempt for parliamentary involvement in this issue."

Mr Barnett said his preference was for the Bill to go to committee, though Mr Abetz was "quite genuine" in what he was proposing.

The report was seized on by federal Small Business Minister Nick Sherry, who said yesterday that he welcomed the decision "not to proceed" with the WA legislation.

However, even if the Liberals vote as one against the Bill, it could still be passed if Mr Sherry's state Labor colleagues, and the Nationals, back the legislation.

The committee is expected to report back on the Bill by May next year.

It is similar to proposed legislation in South Australia, and comes after the federal government rejected the notion of fines and a statutory definition of good faith in its amendments to the franchising code of conduct.

The Bill - which would allow for fines of up to $100,000 for breaches and allow for a statutory definition of good faith - has been the subject of furious behind-the-scenes lobying by both supporters, largely franchisees, and opponents, mainly franchisors.

But one of Australia's most prominent franchisors said he supported the thrust of the Bill.

Michael Sherlock, the co-founder and former managing director of Brumby's Bakeries and the former executive chairman of the Franchised Food Company (owner of the Mr Whippy and Cold Rock Ice creamery brands), now works as a consultant for franchises.

Despite reports of others threatening to move their businesses from the state, Mr Sherlock is promoting the expansion of round-the-clock gym franchise Stepz to WA.

He said while there were some concerns regarding state-based laws for a national industry and around removing franchisees who did not comply with standards, he generally supported the thrust of the Bill given the unsatisfactory settling of disputes in the past.

"That's provided people doing the wrong thing don't get protection and use it as a refuge to hide behind," he said.

"But there's no smoke without fire in a lot of these disputes. There's obviously some need for protection.

"The pendulum swung too far one way and now it's swinging back."

Mr Sherlock backed Mr Cowin's comments, saying the matter should be left to parliamentarians.

"They know what they're doing," he said.

There had been similar concerns when the national code of conduct was introduced in the mid-1990s, but everyone in the industry had "just got on with it".

"They all said it was the end of the world as we know, but that just hasn't been the case," Mr Sherlock said.

His comments follow those of Mr Zumbo, who drafted both the WA and an earlier similar South Australian Bill. He rejected claims the Bill would have allowed for automatic right-of-renewal of contracts.

Quick Service Restaurant Holdings managing director Mark Lindsay said he would welcome the Bill going to a parliamentary committee.

"We have some concerns around the automatic right of renewal and extra-territorial (how the Bill applies to franchisors and franchisees not based in the state) stuff in the Bill, we've spoken to a number of (Cabinet) ministers and they can see that an oversight occurred," he said.

Quick Service owns the Red Rooster, Chicken Treat, Chooks, and Oporto fast food franchises in Australia.

Mr Lindsay also clarified reports that "3800 jobs" from his company could be lost if the Bill became law, saying if his company moved its head office elsewhere as a result, 60 or 70 jobs would go with it.

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Risks: Australian state franchise legislation, 2010, Bullying, Churning (serial reselling), Contempt for democracy , Franchise Council of Australia, FCA, Franchisors want the minimum regulation they can get away with, Hidden agenda, Money swears, 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, Australia, 20101118 Hungry jack

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