January 2011 deadlines for two extra franchise inquiries

While many businesses managers and owners will be taking time off over the holiday season, franchise sector participants may find themselves preparing submissions to legislate franchising in Western Australia and South Australia. 

Both states have previously had private members bills tabled to create an additional layer of regulation on top of the existing Federal Franchising Code of Conduct.

In WA, the committee that will consider the impact of the private member’s bill proposed by Liberal backbencher Peter Abetz in October, has released its terms of reference and will take submissions up until January 24, 2011.

The WA Economics and Industry standing committee consists of five MP’s as well as co-opted but non-voting member Peter Abetz.

The committee’s terms of reference are to consider whether the passage of the proposed Franchising Bill 2010 in its current form would:

(a) be directly inconsistent with the Trade Practices Act 1974 and the Franchising Code of Conduct, with particular reference to the inclusion of provisions for:

i. the requirement to “act in good faith”;

ii. civil monetary penalties;

iii. injunctions;

iv. redress orders; and

v. damages;

(b) enhance the purpose of the Franchising Code of Conduct, which is to regulate the conduct of participants toward each other; and

(c) result in a cost impact on the State or participants in franchising.

The WA bill includes a provision for redress orders to compel the renewal of franchise agreements at the end of a term, a definition of good faith – a concept still evolving through case law – to regulate behaviour by franchisors, and the provision for third parties to franchise agreements to seek damages against a franchisor. The bill also includes a six-year statute of limitations for any claims in breach of the proposed WA laws.

Meanwhile in South Australia, the state’s Economic and Finance Committee has also resolved to take submissions on how changes to the Franchising Code of Conduct (which came into affect on July 1, 2010) addressed recommendations made by the committee’s 2008 state inquiry into franchising.

Following the 2008 SA franchise inquiry, Economic and Finance Committee member and Labor MP Tony Piccolo put forward a private member’s bill in December 2009 to regulate franchising in South Australia.

While Piccolo’s bill subsequently lapsed as a result of the SA state election earlier this year, SA Business Ministor Tom Koutsantonis announced in October that SA would proceed with state legislation and thanked Tony Piccolo for continuing to lobby for legislative change.

The committee will receive submissions on the Code changes in relation to its 2008 inquiry findings up to January 21, 2011, just three days before the WA submissions close.

In announcing its supplementary inquiry, the SA committee has stated submissions to it will be subject to Parliamentary privilege, however it is unknown if this will be the case for submissions sent to the WA committee.

Details of the SA committee supplementary inquiry are yet to be posted to the South Australian government website, however submissions can be sent to:

Executive Officer

Economic and Finance Committee

Parliament House

North Terrace

ADELAIDE SA 5000

Or

The Committee’s email address: EFC.Assembly@parliament.sa.gov.au

Inquiries should be directed to the Committee’s Executive Officer, Dr Paul Lobban, on telephone (08) 8237 9223.

A copy of the 2008 South Australian franchise inquiry report can be found online by clicking here, then expanding the “Documents” section, then expanding the “Completed Inquiries” section and scrolling down the list to “65 Report – Franchises”.

An uncertain year ahead in 2011

With two states determined to further consider – and possibly introduce – their own legislation for franchising in 2011, and the year starting with calls for submissions to further inquiries by both, the year ahead poses great uncertainty for the franchise sector.

Many franchise sector participants, both franchisors and franchisees, will be unaware of the January deadlines for these inquiries, and may miss the opportunity to submit given the holiday season timeframes.

Should one or both states ultimately introduce their own form of state franchise legislation (both of which have previously noted would be in addition to the existing Franchising Code of Conduct), franchisors and franchisees can expect greater complexity in understanding, adapting to and complying with the new laws, which could in turn increase the cost of business, and affect franchise investment confidence in those states.

All that – and presumably other challenges yet to be revealed – for the year ahead.

Thank you for reading my franchise blogs this year and best wishes to all readers for a happy Christmas and a prosperous New Year.

Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for nearly 20 years at franchisee, franchisor and advisor level.

He advises both potential  and existing franchisors and franchisees, and conducts franchise education programs throughout Australia, and publishes Franchise News & Events, a fortnightly email news bulletin on franchising issues and trends. 

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