Dr Michael Schaper’s review of the Franchising Code of Conduct has been released, and has been welcomed by the Australian Small Business and Family Enterprise Ombudsman, Bruce Billson.
“Dr Schaper has produced a well-researched and thoughtful report for the Australian Government and we support the report and the majority of his sensible recommendations to strengthen the Franchising Code and regulatory landscape for small and family businesses,” Billson said.
“The franchise sector is worth $135 billion and employs more than half a million people. There are some 70,700 franchisees in Australia and almost all of them are small businesses, as are many franchisors,” Billson added. “We need to have the right balance between regulatory safeguards and conduct expectations for franchisees and franchisors while providing for incentives for businesses to invest, develop, take risks, boost productivity, innovate and share success in franchise partnerships.”
Several of the recommendations involve the office of the Ombudsman, which Billson enthusiastically supported.
“We support the recommendation for a clear statement of purpose to be inserted into the Code to explicitly state why it exists and what it seeks to achieve,” Billson said. “Similarly, we back changes that would also provide a clear statement to prospective franchisees that while purchasing a franchise provides an opportunity to make a reasonable return, it does not guarantee a fixed rate of return. The statement would also outline other terms of their arrangement, so they have quality information to make an informed decision.”
Within the review Dr Schaper recommended that the ASBFEO, ACCC and other agencies develop best practice guides to improve standards of conduct in franchising.
“This is an opportunity to promote good behaviour and shared success and encourage exemplar and best practice,” Billson commented.
Schaper also recommended expanding ASBFEO’s powers to name franchisors who have not participated meaningfully in alternative dispute resolution.
“At present we can only use this power under our Act as it relates to general business disputes, rather than as part of obligations under the Code,” the ASBFEO explained. “These additional powers should apply to franchisees as well as franchisors.”
The review also recommended that the Government also investigate the feasibility of introducing a licensing regime to regulate most aspects of the franchisee-franchisor relationship better.
“We think the Government should analyse the costs and benefits of introducing a licensing regime to regulate the franchisee-franchisor relationship – noting that Australia’s franchising system is already highly regulated and the vast majority of franchise parties on both sides of the relationship are small, less well-resourced businesses,” Billson said. “In exploring whether there are advantages in introducing a licence system, it will be important to examine why existing safeguards and better franchising practice Code expectations are not always implemented.
“Lamentably, in many cases, not enough use is being made of existing powers to take action,” he added. “Small and family businesses are not easily able to enforce protections under the Franchising Code and hope and rely on the regulator to take action where they feel they have been infringed upon.
“We encourage the Government to consider how a revised Code could be more effectively enforced. We have proposed the introduction a Federal Small Business and Codes List into the Federal Circuit and Family Court of Australia, to provide small businesses with an affordable and timely means of enforcing their legal rights,” Billson concluded.
