Franchisors need to get organised to look after their interests, delegates were advised at the Australian Franchise Summit earlier this week.
In a panel conversation with lawyer and mediator Alan Wein, and Dr Michael Schaper, who have both undertaken reviews of the Franchising Code of Conduct, the franchise sector was advised to be proactive about proposed changes to franchising rules, rather than waiting to be approached for a contribution to the debate.
Franchising must be its own advocate
Dr Schaper said the sector has structural issues to consider but cautioned franchisors from viewing government as the solution to problems.
“Franchising has a perception that if there is a claim or dispute, or misperception about franchising, it is the role of government to fix this. Regulators don’t see this as their job,” Schaper said.
The industry must be its own advocate, he said. “Don’t rely on someone else to look after your own best interests,” he counselled.
Schaper is a former deputy chair of the Australian Competition and Consumer Commission. He said “The ACCC is an omnibus regulator. It’s ambit is extraordinarily wide with over 1000 staff, and it’s responsible for everything from water rights, misleading advertising, mergers and acquisitions to the price of postage stamps.
“It’s essentially a court-based system, which is appropriate, but not necessarily what franchising is looking for,” he said.
Courts demand proof, take time and are costly, which doesn’t suit the nature of the majority of franchise disputes, he added.
Mediator Alan Wein, who conducted the 2013 review of the Franchising Code, said most disputes were a result of unrealistic and inappropriate expectations between franchisor and franchisee.
He cautioned franchisors against “pushing people into scenarios they are not suited for” when they don’t have enough franchisee candidates.
Schaper suggested a licensing regime acting as a dispute resolution body would be more appropriate than the court route, with the ACCC seen as the last resort.
Licensing option
In his review of the Code’s effectiveness, Schaper raised the prospect of a licensing regime as something for discussion but gave little detail about its possible construct beyond the possibility it could determine whether or not someone is fit to operate as a franchisor.
At the Australian Franchise Summit he suggested it could have a number of functions including the capacity to investigate and settle disputes between franchisors and franchisees.
A licensing system could also take on responsibility to educate the broader community on how the franchising sector works, Schaper suggested.
He said such a licensing system has worked for more than a decade in the telco and financial sectors.
“Industry players ought to say what’s reasonable,” he said.
Schaper praised the consolidated view presented for his review by the Franchise Council of Australia and suggested a simultaneous, multi-level approach would be most effective as the sector engages with the Treasury taskforce to consider the licensing option.
