Minister for Small Business Julie Collins has announced that the Australian Small Business and Family Enterprise Ombudsman will take the lead in improving the standards of conduct in the franchising sector.
In particular, the ASBFEO will develop best practice guidance and education, improve the comparability and publication of franchising data sets, as well as the power to name and shame franchisors who have not participated meaningfully in alternative dispute resolutions.
The Ombudsman’s existing service that provides small businesses with low-cost legal advice about disputes with the Tax Office will also be expanded to cover initial advice about franchising disputes.
“These changes are a natural extension of our existing role and an opportunity to promote good behaviour and shared success in this dynamic sector of the economy by encouraging exemplar and best practice,” Ombudsman Bruce Billson said.
The decision comes in the wake of the Government’s acceptance of the recommendations put forward in the review of the Franchising Code of Conduct made by Dr Michael Schaper. The Government is set to amend legislation to provide ASBFEO with these new powers.
“We need to have the right balance between regulatory safeguards and conduct expectations for franchisees and franchisors while providing incentives for businesses to invest, develop, take risks, boost productivity, innovate and share success in franchise partnerships,” Billson said.
The Government is also set to expand ASBFEO’s Tax Concierge Service to support access to low-cost legal advice on alternative dispute resolution matters. It will also consider further changes as part of the independent statutory review of the ASBFEO dispute resolution services next year and establish a Treasury taskforce to conduct a cost-benefit analysis of introducing a licensing regime for the franchise sector.
“ASBFEO’s legislation requires a review at least every four years of the way that we operate our assistance function and whether the approaches, tools and resources available to us to resolve disputes are adequate or could be enhanced,” Billson explained. “The concept of a licensing regime is a bold suggestion for a franchise sector that is already more highly regulated here than in other comparable economies and ASBFEO looks forward to contributing to the feasibility work of the proposed taskforce.
“We believe there is scope in franchising for the Government to consider a non-regulatory approach to activating the existing option for parties to agree to arbitration under the Franchising Code of Conduct by urging franchise systems to pre-commit to binding arbitration where disputes cannot be resolved through alternative dispute resolution,” Billson added. “But there also needs to be more effective enforcement by regulators, such as the ACCC, of the Code and other legal protections that already exist, particularly around unfair conduct and anti-competitive behaviour.
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 some franchisors.
“Currently, it is only the well-resourced and patient that can further pursue their interests via existing legal channels, unless the regulator steps up and in. This can distort the bargaining position of the parties and willingness to find an early mediate resolution, and is why we advocate for a responsive, affordable and restorative Court-based mechanism that can ensure all parties can benefit from Code protections and legal provisions intended to support fair and reasonable commercial dealings,” Billson said.
“We believe that would be a game changer to deliver the Government’s objective to give people the confidence to enter business relationships and to invest, with the ‘bumper rails’ that aim to ensure reasonable dealing and fair commercial conduct being supported by an affordable and accessible legal process if it is required,” he concluded.
