Jack Cowen’s company Competitive Foods has labelled a Western Australian inquiry into franchising a “failure” and has promised to continue its fight for reform of the sector.
Chairman of the wide ranging inquiry into the franchise sector, Chris Bothams, yesterday delivered his report to Western Australian Small Business Minister Margaret Quirk.
Bothams’s recommendations include:
- Increased disclosure by franchisors on matters such as their financial position and their services they will provide to franchisees.
- Amendments to the Franchise Code to make explicit whether a franchisee is entitled to any compensation for goodwill when a franchise licence ends.
- The imposition of penalties for breaches of the Franchising Code.
- The establishment of a dedicated franchise enforcement unit within the Australian Competition and Consumer Commission.
The inquiry was established largely as a result of pressure from fast food entrepreneur Jack Cowen after Yum Foods International, which owns the KFC brand, refusing to renew KFC franchise licenses held by Competitive Foods in Western Australia.
But Competitive Foods spokesman Paul Plowman says the inquiry report falls well short of addressing the company’s concerns.
“The Bothams inquiry and the report handed down yesterday has failed to address the central issue in regards to the bullying tactics being employed by a multinational in taking over an Australian business without any reference to the value of goodwill established over 30 years of operation,” Plowman says.
The reports focus on franchisee education and disclosure fails to address basic problem problems facing franchisees.
“The issue is much more fundamental and brutal in business terms than disclosure” he says. “Even if implemented none of these recommendations would materially change the circumstances surrounding our stores in WA.”
The impact of the inquiry’s recommendations are also limited by the fact the Federal Government has responsibility for the Franchise Code and the Trade Practices Act.
The Franchising Council of Australia has a more positive view of the Bothams report, however. FCA chief executive Steve Wright says the reports focus on disclosure and franchisee education is appropriate.
“Mr Bothams has identified education as a key element of addressing some of the franchisee concerns raised in the inquiry, that is an issue we have put to state and federal governments and is something we will continue to press for,” Wright says.
He rejects Competitive Foods’ argument that changes need to be made to give greater recognition to goodwill when franchise agreements ned.
“Our position is that good will is an issue on which courts have adjudicated. Jack Cowin is entitled to take that up but we don’t regard it as the most important aspect of continuous improvement in the franchising sector,” Wright says.
Western Australian Small Business Minister Margaret Quirk says she will raise the recommendations of the inquiry when the nation’s small business ministers meet next month.
