Franchising to face Senate inquiry

The Senate has voted to proceed with the proposed inquiry into franchising.

Nationals Senator for New South Wales, Senator John Williams, was successful today in his move to refer the sector to the Parliamentary Joint Committee on Corporations and Financial Services for an inquiry and report by the 30 September 2018.

Bruce Billson, executive chair of the Franchise Council of Australia, issued a statement in response to the Senate vote.

Billson said “It is unclear how the Senate inquiry will discern between the unavoidable challenges all small business owners face and the implications for enterprise success, and those particularly relevant for the small franchise business owner.”

The FCA had not been consulted on the terms of reference or invited to contribute to the submission calling for an inquiry, he said.

“The FCA encourages all stakeholders in the success of Australian franchising to contribute to the parliamentary inquiry.  This will assist the Committee to identify the causal factors, including third party conduct by parties outside the franchise relationship, and the role of the franchise business model and its contribution to business viability, when considering cases of poor commercial outcomes.

“This kind of informed and thoughtful examination will help to identify any deficiencies or gaps in the current regulatory framework, unfair contract and fair trading protections and dispute resolution mechanisms, which the Senate has resolved to be the focus of the inquiry.

“Ensuring that there is a full understanding of the current regulatory and competitive environment will mean that any recommendations for additional red-tape, policy change, adjustment to agency operations or new public education and awareness campaigns, have been thoroughly assessed for their likely impacts,” the statement continued.

“The identification of any gaps or deficiencies, and some scrutiny of regulatory enforcement action, would be helpful and beneficial at this time, and help establish whether the current comprehensively regulatory framework is ‘fit for purpose’, fully activated and enforced.”

Billson called for an “objective, balanced, informed and analytical inquiry” with conclusions and recommendations that can help “to ensure Australia maintains its reputation as a leading economy in which to develop and deploy the franchise model of entrepreneurship”.

Senate inquiry terms of reference

The terms of reference for the Senate inquiry include:

The operation and effectiveness of the Franchising Code of Conduct in ensuring franchisees have “all information necessary to make a fully-informed decision” about signing a franchise agreement – such as likely financial performance, worse-case scenarios, the contractual rights and obligations of all parties, leasing arrangements and limitations, expected running costs including costs of goods through prescribed suppliers.

Other elements to come under scrutiny include the effectiveness of dispute resolution; unfair contract provisions on new, renewed and terminated franchise agreements; termination provisions in the Franchising Code of Conduct; restraints of trade; breaches of the Code.