The Western Australian Government has announced the terms of reference for the inquiry into franchising in WA.
The inquiry, which will be chaired by franchisee Chris Bothams, manager of the South East Metro Small Business Centre, follows cries for help from Jack Cowin’s Competitive Foods.
Competitive Foods, worth an estimated $350 million, operates 46 KFC franchises in Western Australia, four in the Northern Territory, as well as 300 Hungry Jack’s outlets around Australia.
SmartCompany reported last week that the world’s biggest fast-food company, US-based Yum Foods International, which owns the KFC brand, is refusing to renew the franchise licenses held by Competitive Foods in Western Australia.
Labor MP Paul Papalia told WA Parliament last week that Yum Foods had offered to buy Competitive Foods’ KFC licences for “significantly less than their market value”.
A spokesman for Competitive Foods told SmartCompany that the offer was rejected but negotiations are continuing. If a deal can’t be reached, Yum will take control of each outlet as its franchise agreement comes to an end. The first licence to expire is the KFC in Rockingham on 19 November.
WA Small Business Minister Margaret Quirk announced the terms of reference of the franchising inquiry on Friday.
The inquiry’s terms of reference are to:
- Review the adequacy of existing legislative provisions, both state and federal.
- Identify whether emerging trends in the franchising industry disclose patterns of unconscionable conduct that may not be covered under existing laws.
- Examine whether existing remedies available to franchisees are adequate and, where appropriate, recommend changes.
- Review existing practice in other jurisdictions, Australia and internationally, on unconscionable conduct and renewal of licences.
The inquiry would invite written public submissions, with public hearings scheduled for metropolitan and regional areas over the coming months.
“This inquiry is about fairness in franchise arrangements,” Quirk said in a media statement. “I am concerned that existing franchise arrangements in WA may not offer sufficient protection or information to franchise operators who may find themselves in a similar situation.”
David Beddall, chair of the Franchisee Association of Australia, says it is interesting that when a large multi-outlet franchisee asks for action it gets some. “Small individual franchisees face these problems on a daily basis.”
His organisation wrote to Labor and the Government on the day the election was called, seeking a federal parliamentary inquiry into franchising.
He says state law reform would create a situation where each jurisdiction has its own laws. “We don’t want to follow US model where there is different laws in different states, adding to complexity.”
The franchising industry is currently subject to the mandatory Franchise Code under the Trade Practices Act. Earlier this year, the Federal Government accepted some of the recommendations of the Matthews inquiry.
Chris Bothams, the chairman of the inquiry, has twice been awarded the Western Australian Franchisee of the Year, and in 2002 was named the National Franchisee of the Year.
The inquiry will report on 31 March.
Jack Cowin’s dispute with Yum Restaurants over the future of the KFC franchises in Western Australia is not the first time that he has fought an international franchisor for the right to keep operating his franchise business in Australia.
In the late 1990s and early 2000s, Cowin went into battle with Burger King, the owner of the Hungry Jack’s franchise in Australia. Burger King tried to enter Australia in its own right selling Burger King franchises to third parties and seeking to terminate its franchise agreement with Cowin.
After years of litigation, in mid-2003 Cowin and Burger King settled, with Burger King agreeing to re-brand 81 Burger King restaurants in New South Wales, Australian Capital Territory and Victoria as Hungry Jack’s to create a national network of about 300 restaurants.