Franchise sector awaits code review recommendations

Submissions to the current review of the Franchising Code of Conduct are now online, and make for interesting reading.

Out of 73 submissions lodged with the inquiry, the majority have been published except for approximately 13 submissions that were lodged in confidence.

If the number of submissions received is any indication of satisfaction (or otherwise) with the Code, then it is worth noting that the 73 submissions received is almost exactly half the number received by the last federal inquiry into the Franchising Code, held in 2008.

It’s a long bow to draw, but a lower number of submissions can potentially indicate a higher level of satisfaction by participants in the sector with the operation of the Code, particularly following the amendments introduced on July 1, 2010 as a result of the last inquiry.

Submissions to the inquiry can be broadly categorised into the following groups:

  • Franchisees (both current and former);
  • Franchisors;
  • Legal practitioners (including individuals, firms and law associations);
  • Business groups (such as the Franchise Council of Australia);
  • Government agencies (including small business commissioners and the Australian Competition and Consumer Commission (ACCC);
  • Others (including franchise consultants, universities and politicians).

Many of the individuals and groups which have submitted to the current inquiry are the same as those who submitted in 2008.

The different perspectives of each interest group which lodged submissions create a diverse spectrum of opinions for the Code reviewer, Alan Wein, to assess in determining his final recommendations to the federal government.

An analysis of the submissions by Queensland franchising lawyer Simon Young indicates that the majority of submissions address only certain elements of the Inquiry’s terms of reference, and names only four submitters (including the Franchise Advisory Centre) which addressed all the terms of reference in their submissions.

Young’s analysis of the key issues listed by submitters (which did not align with the terms of reference of the review in all instances) indicated that good faith; penalties for breaches of the Code; further disclosure requirements and the role of the ACCC are hot buttons for the sector.

Of the 60 submissions available to view, Young found that the issue of Good Faith seems to equally divide the franchise sector (possibly because of the difficulty of defining the term) but that there appears to be stronger support for the introduction of penalties for breaches of the Code.

Additionally, Young noted that there was support in a number of submissions to increase the role of the ACCC in enforcing the Code, and that dispute resolution could benefit from a reduction in the cost of, and access to, mediation services.

However, these are conclusions drawn by one observer, and a different observer may assess the Code submissions differently.

Code reviewer Alan Wein will be (or has already) lodged his final report and recommendations with the federal government, and now the sector can only wait and see what those recommendations might be, and which (if any) the government accepts.

The final report for the last Code Review was released in December 2008, but it was almost exactly a year later before the then federal business minister, Craig Emerson, responded to the report and identified the recommendations that the government would accept.

It is expected, however, that with a federal election pending in September, the federal government will move more quickly on the recommendations of this Code Review.

The sector can only wait and see.

A breakdown of the positions of the submitters on these issues is shown below:

For Against No discernible position Total analysed
Introducing “good faith” in Code 23 23 14 60
Introducing penalties for Code breach 29 17 14

60

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

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