FCA proposes $10m cost savings in Code review submission

FCA Code review submission
The submission draws on feedback from FCA members. (Source: Bigstock)

The Franchise Council of Australia (FCA) believes it could save least $10 million in annual compliance costs if the Federal Government’s Review of the Franchising Code accepts its recommendations.

FCA chair Brendan Green said “Streamlining compliance and red tape requirements alone will free up an estimated $10 million each year without reducing the protections for franchisees or franchisors – that’s a huge opportunity especially in the current climate.”

The FCA Code Review submission calls for action across three key areas: removing duplication including by embracing technology; reducing red tape and compliance costs; and ensuring consistency with other existing regulatory and legal requirements.

FCA calls for urgent action on retail tenancies

The FCA has also highlighted the urgent need for action on Retail Tenancies in its submission.

Extensive feedback from members collated during the recent National Roadshow and Online Forum contributed to the submission.

Green said members raised issues of retail leasing at every consultation.

“By far the major cause of most franchising disputes can be traced to the conduct of major shopping centre landlords,” he said.

“We are seeing landlords seeking rental from tenants that were unable to trade during Covid, plus CPI rental increases under leases, whilst at the same time offering new tenants substantial rental discounts.

“The Review’s proposed Unfair Contract Terms reforms appear to have left retail leasing untouched. This needs to be urgently addressed so that that franchisors and franchisees are not vulnerable to unfair arrangements and unconscionable conduct by major landlords.”

Green said the FCA is hopeful the Review “will address the issue of wide-spread duplication, excessive red-tape and the need to better align the requirements of the Code with the expertise, knowledge and track record of franchisors and franchisees.”

FCA Code Review submission informed by member feedback

FCA CEO Matthew Monaghan thanked all members for their contribution during the National Roadshow and advisory council meetings to capture the sector’s thoughts and data for the submission.

“The generosity of FCA members in taking part in our national consultation process was critical in shaping our submission. It’s a comprehensive document which clearly sets out the current frustrations and areas for improvement.”

Monaghan said there were unintended consequences from the 10 reviews since the Code was introduced in 1988.

The complexity and duplication have created an unnecessary financial burden on franchisors and franchisees, he said.

The FCA will embark on a formal advocacy program around the Code Review submission.