The background paper for the West Australian Government’s inquiry into the operation of franchise businesses in Western Australia released earlier this week confirms that the inquiry will be very wide ranging.
The background paper states the inquiry is into “fairness in franchise arrangements”.
It will review state and federal legislative provisions and look for patterns of unconscionable conduct and examine available remedies.
It won’t be re-doing the work of the recent Federal Government-commissioned Matthews inquiry, but it is “an opportunity for the state government to speedily identify any other concerns in the franchising industry and ascertain whether there is a fair and competitive environment for franchised businesses to operate in”.
It defines the key issues for the inquiry as being the issues relating to the end of the contract and non-renewal of the franchise agreement, rather than the disclosure the franchisor must make to potential franchisees before signing them up.
This issue reflects the events that precipitated the inquiry. Multi-millionaire Jack Cowin’s KFC franchise agreements in WA are progressively expiring and the franchisor Yum International is refusing to renew them.
Unless the parties can come to an agreement, Cowin’s company will lose the benefit of the goodwill built over 20 years of operating the brand in WA.
Goodwill is one of the four key issues identified in the background paper. The others are:
- Franchise churn.
- Good faith bargaining.
- Unconscionable vs unfair conduct.
The inquiry, which is calling for submissions, lists 10 discussion points, including should a franchise be given the rights at the end of a franchise agreement, and what these rights be?
The inquiry chairman, Chris Bothams, manager for the South East Metro Small Business Centre, will provide his report to the WA Minister for Small Business Margaret Quirk by 31 March 2008.