Franchising

New minister for small business to deliver the good oil on franchising?

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The new Small Business Minister should make for positive change in the franchising landscape.

 Last week’s confirmation of Craig Emerson as Federal Small Business Minister should come as good news to the franchise sector. Emerson’s appointment should provide continuity by creating a smooth transition from shadow minister to minister, and consistency in Labor’s approach to the small business sector from opposition to Government.

 

For franchising, Emerson should be good news. With the exception of a couple of years running his own consultancy, he has been a career public servant working for Australian state and national governments, as well as the United Nations.

 

In itself, a career as a public servant may not at first be appealing to the small business sector, but look past that at his impressive academic qualifications. Emerson holds a doctorate in economics, which means he has more than a passing understanding of how markets work, how they grow, and what it takes to keep them alive and vibrant. More than most, Emerson will understand why franchising has variously been described as “one of the greatest inventions of western capitalism[1]” and “the single most successful marketing concept ever[2]”.

 

In this regard he is no slouch. In the lead-up to the election, the Franchise Advisory Centre asked both Emerson and the then small business minister Fran Bailey to provide a policy statement on franchising for the electronic bulletin Franchise News & Events. Not only did Emerson deliver in the requested timeframe, but he also provided a range of intelligent and well-considered policies that in the main should auger well for the sector.

 

Bailey, on the other hand, flick-passed the request for a franchise policy statement to the Coalition’s headquarters, which responded late and in a format different from that which had been requested. When the Coalition policy finally arrived, it said virtually nothing about the future of franchising in Australia. Then, in the dying days of the election, Bailey announced that more comprehensive changes to the Franchising Code of Conduct might be considered – a move completely at odds with her policy statement.

 

Emerson has a couple of franchising challenges to deal with in his first couple of months in office. The first is balancing the interests of the Western Australian and South Australian governments who have both announced state-based inquiries into franchising, against the national regulatory framework already in place for the sector.

 

Condemnation of these inquiries by various groups automatically assumes the prospect of additional, state-based legislation, which would be regressive and counter-productive to the growth of franchising in Australia. Emerson’s challenge is to minimise the risk of additional state-based legislation for franchising, while at the same time drawing national lessons from these inquiries to benefit the sector as a whole. Government support for education initiatives, particularly pre-entry education for franchisees, would be invaluable in this regard.

 

The other challenge is how he deals with franchise interest groups that have decried franchising as a whole, based on the unfortunate circumstances of individual franchisees. As an economist, Emerson will know that it takes many lubricated wheels working together to make a strong and efficient economic machine. By contrast, politicians normally function on the basis that the squeaky wheel gets the oil.

 

Hopefully in Emerson, the economist will outweigh the politician.

 

 

 


 

 



[1]US House of Representatives Committee on Small Business

[2]Naisbitt, John. Megatrends, 1982

 

Jason Gehrke has a passion for franchising. He has been involved in the sector for 17 years as a franchisee, a franchisor, provided PR and marketing services to more than 30 leading Australian franchise systems, and presented to literally thousands of potential franchisees and franchisors over the years. He is a director of the consultancy Franchise Advisory Centre and is the immediate past CEO of automotive paint and plastic repair franchise, Kwik Fix International, a 2004 Australian Franchise System of the Year winner.

 For more Franchise Tips & Trends blogs, click here.

 

Comments

Deanne de Leeuw writes:  The state-based inquiries initiated by the WA and SA governments are a strong step towards initiating open conversation regarding important issues within the franchising sector. I do not believe that these state-based inquiries will result in the introduction of state franchising law; rather I would suggest that the result will be the public outing of the real issues of franchising, not just those put forward by self-interested lobby groups. The inquiries will also put forward recommendations that can be taken up on a federal level.

It is my hope that Dr Emerson will be listening hard to the outcomes and recommendations of the state-based inquiries and in turn launch a federal inquiry with the intention of introducing new national franchising legislation. It is needed to protect both the franchisees and the honest franchisors who are all being damaged by the actions of the small number of rogue franchisors in their midst.

 
Cher Borradale writes: Jason, you write an exceptionally good article but you miss the point that the “squeaky wheels” you mention and the understated “individual franchisees” are a large group of people who represent the 6% of franchising that is under threat from rogue franchising. They squeak loud and will continue to squeak loud and not for any personal gain. They dedicate their time to protecting future franchisees and franchising and I would hope that no one confuses the motives of these people with those of the self-interested Franchise Council of Australia.

 

It takes very little research to find the extent of franchising victims in countries such as Australia, the USA and Canada to name but a few. Canada and the USA are seriously attempting to deal with the opportunism that exists but they also have to struggle with the well-fed propaganda machine that the wealthy rogue franchisors finance.

 

I watched with optimism as Kevin Rudd took an oath to “protect this land and the people who live in it.” Rudd has committed to make a real effort to deal with the plight of the homeless. That is an immoral situation previously ignored. So is the situation faced by many franchisees and it won’t go away and it won’t fix itself.

 

Fran Bailey reviewed and strengthened the disclosure requirements in franchising only six months ago, but it was too little and 30 years after the USA also thought that was the complete answer to eliminating rogues. It did nothing. No one seems to want to do the research to confirm the problems and the efforts made internationally. It is hard and it is complex and it is dirty and it should be embarrassing.

 

The governments of WA and SA should be congratulated for taking on the moral challenge and instigating inquiries into franchising. I agree that this should be a federal initiative but someone has to do something and the states are a better alternative than what has been, and is, on offer from Federal Government. Nothing! There has been nothing of substance to create any confidence, only a smear of spin as an attempt to placate the peasants and give the influential a chuckle.

 

 

Glen Shepherd writes: No one said that bad franchisors are in the majority. They are not. The majority of franchisees operate in terrific franchise systems and franchising works. That should be enough reason to do nothing about those who do lose everything at the hands of the fraudsters. They lose a business and they lose a home and their health and often lose their family through divorce brought on by depression. There have after all only been a few suicides. So why should we all worry about only a few and why should Craig Emerson be distracted by state inquiries into franchising.

Ruth Nimbalkler says: Yes, I am hoping that this Government will seriously look at franchising and their partners the banks and landlords. It must happen soon as this system is causing a lot of families in this nation’s homes and sometimes the lives of our loved ones. We need to stop these corporate bullies and make Australia aware of what can be done when a group of corporate bullies get together to destroy hardworking families who cannot afford to stop them as they have been financially and emotionally ruined. I think the message from the elections to this group is that the Australian people will not stand for any form of crimes against humanity – we are people that care for each other.

 

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