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WA Franchise fight fizzles

Written on the 22 November 2010 by My Business E-News

WA Franchise fight fizzles
My Business E-News
22 November 2010

The Franchise Council of Australia’s campaign against a proposed West Australian law that would have brought the State’s regulation of franchises out of line with national legislation appears to have succeeded.

Liberal backbencher Peter Abetz proposed a private member’s bill that he said was designed to stop rogue franchisors. “The franchisor/franchisee relationship should be a mutually beneficial relationship, but unfortunately, some rogue franchisors have been indulging in unethical and even predatory conduct,” he said in a statement.

“Franchise owners across the country are being hurt financially ... there have been a number of enquiries into franchising at both State and Federal level, and ... no government has acted to implement the key recommendations.”

The Executive Director of the Franchise Council of Australia (FCA), Steve Wright, opposed the bill on several grounds, one of which was that “franchising is rightly regulated nationally,” and State legislation therefore adds unwelcome complexity.

Wright also said that Abetz cannot identify the rogues whose behaviour he hopes to correct. “Mr Abetz provides no data to support the need for the bill’s introduction,” he said in a statement. “He has provided no case studies; nor named the rogue franchisors he says are the motivation for the bill.”

A third argument suggests that Abetz was not supported by the franchise community: the FCA collected statements from prominent franchisors saying they would quit the State and take thousands of jobs with them if the law was enacted.

“Franchise business financiers do not support this bill,” Wright said. “They see it as destabilising and potentially damaging for the sector. It is likely, therefore, they will reassess and perhaps re-price risk. This means it will be harder for franchisees to get funding and they may pay a higher price.”

Abetz countered that his bill did enjoy support from the franchise community, and cited “a crowd of almost 50 franchise owners and supporters” that gathered on the day he introduced the bill as proof of enthusiasm for his ideas.

But last week, the West Australian Liberal Party indicated it would not support the bill, making it very unlikely it will reach Parliament or become law.

58 per cent of franchisors in dispute

But Abetz seems to have a point that not all is well in the franchising industry, as new research from marketing intelligence company 10 Thousand Feet suggests “... in the past three years one in two of Australia’s franchisors had been involved in a formal dispute with a franchisee. Fifty-eight per cent of franchisors reported having a formal dispute with a franchisee, 34 per cent had disputes that were required to go to mediationand 17 per cent had disputes that were required to go to court.”

But in its notes on the research, 10 Thousand Feet quotes Tony Conaghan, Franchising Partner at law firm DLA Phillips Fox, as saying that “Unlike countries like the United States, Australia has had the advantage of a national ... code being the Franchising Code of Conduct.

There is no need for additional state regulation which would mean that franchisors would have different obligations in different states.

Consequently, if the legislation is passed, it would act as a disincentive to franchisors to open operations ... because of the increased risk and compliance costs of managing different pieces of legislation.”

Author: My Business E-News

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