What franchising lessons learned in 2019 can boost the year ahead?

Has 2019 been a good year or a bad year for franchising? Inside Franchise Business asked sector peak body Franchise Council of Australia,  advocacy group Franchise Redress, and franchise psychology specialists Franchise Relationships Institute to reflect on the past 12 months and any lessons learned.

Franchise Council of Australia

Mary Aldred, CEO

This year has been 12 months of focused review and advocacy activity for the FCA, with a determination to support members, many of whom are small businesses, and to further underpin franchising as the preferred model for small business success.

The organisation is determined to set an industry benchmark where our members lead the way. Better regulation, not more regulation, and a proactive franchising sector working to set the standard, is the best way forward. 

As the peak body, the FCA has been actively working with the inter-agency Franchising Taskforce, putting forward member driven, evidence-based and constructive policy solutions, and we are confident that we will see a sensible regulatory response in 2020.

To better engage franchisees, we have established an FCA Franchisee Advisory Committee, representing each Australian state and a broad range of franchising industries. 

The FCA strongly believes that healthy businesses sustain healthy communities. Our regions are undergoing major economic structural adjustment. The FCA’s regional revitalisation initiative has been developed as a way to provide jobs, investment and fill consumer gaps in towns, and grow franchising brands across Australia. 

We have worked hard and introduced real changes over the last 12 months. We will continue to introduce real reform over the coming months through our new member standards.

Based on member feedback about where to prioritise our attention and focus, the FCA has developed a new strategic plan that recognises the business world in which we now operate, as well as what we want it to be, and sets out the priorities members have talked to me about.  

The key concerns are the issues that impact on day to day operations and profitability – unfair leasing contracts, escalating overheads especially energy costs, absorbing rising wages and penalties, the softening consumer economy, digital disruption and the impact of disruptive new players in the market, especially food retailing.  

The FCA is committed to continuing to work with and on behalf of the franchising community to sustain and strengthen franchising in the year ahead and ensure families see our sector as an employer of choice and an obvious business model to invest in.

Franchise Redress

Maddison Johnstone, director

This year, it’s been encouraging to see disaffected franchisees and workers feeling more comfortable in speaking publicly about their experiences. 

While franchise systems often have dispute resolution systems available, it’s important they identify potential problems before things get out of hand. This doesn’t mean succumbing to unreasonable franchisee demands. Rather it means identifying problems to find a solution, and stop them becoming systemic, or if they are systemic, determining how to proceed ethically. 

A number of franchise systems have been in the news this year for alleged mistreatment of franchisees and workers. This includes Chatime, Nando’s, Grill’d, Life Resolutions, Domino’s Pizza, Jump! Swim Schools and Ultra Tune among others. There are more scandals to come. 

A potential lesson for franchisors involves payroll obligations. Underpayment isn’t unique to the franchise sector. Woolworths admitted to underpaying around $300 million. Others outside of the franchise sector have been caught in payment oversights, system errors, or egregious underpayment. Payroll audits of head office, corporate stores and franchisees is a must. This may identify issues early. 

The Unlawful Underpayments Federal Inquiry has been announced. This is a timely opportunity for franchisors to ensure correct wages and salaries are being paid throughout their network. 

In 2020, we look forward to hopefully seeing the franchise sector reporting the bad behaviour of franchisors early, helping to improve the reputation of franchising in Australia and enabling ethical franchisors to thrive. 

Franchise Relationships Institute

Jewli Turier, director

Success requires collaboration between the relevant stakeholder groups. The stakeholders in Australian franchising need to work together more effectively and identify how to improve the sector.  There is a need to provide clarity on who is responsible for what and where individuals or groups should go if they have a concern.

There is a huge opportunity to engage the voice of the franchisees. Currently this seems to be misrepresented through negative media highlighting the stories of disenchanted franchises.  According to the Franchise Relationships Institute’s research, on average 20 per cent of franchisees have a serious disagreement with franchisors and yet this group is dominating the airways. The Franchise Council of Australia were on the right track this year with the Multi-Unit Summit bringing franchisees from different brands together to collaborate.

Disruption continues to have an impact on all industries and franchisors need to be more proactive in managing this. Brands need to identify innovative ways to protect their brands and successfully manage the changes (sharing in the work and costs) to bring franchisees on board. 

In short, we need to communicate better, inside our businesses, our brands and across the franchising sector.