Franchising reforms announced

A doubling of penalties for breaching the Franchising Code of Conduct is among the franchising reforms announced in the long-awaited Government response to the Fairness in Franchising report.

Minister for Employment, Skills, Small and Family Business, Senator Michaelia Cash and Minister for Housing and Assistant Treasurer Michael Sukkar believe the new measures will help ensure fairness and accountability for both franchisors and franchisees.

“We will strengthen the regulatory framework and restore confidence in the sector while carefully designing changes in consultation with the sector to ensure they are practical to implement,” Minister Cash said.

Franchising reforms

The government reforms will include:

  • doubling the penalties for breaches of the Franchising Code
  • strengthening dispute resolution options by introducing conciliation and voluntary binding arbitration
  • improving disclosure relating to supply arrangements, marketing funds, exit arrangements and significant capital expenditure
  • introducing a mandatory Key Disclosure Information Fact Sheet to highlight key information
  • consulting on developing a public register of franchisors and a franchising website to make it easier to access information

There will be further consultation with stakeholders in shaping these reforms, a move welcomed by the Franchise Council of Australia.

“The world has changed dramatically in the 12 months since the last franchising review consultation and we welcome the Federal Government’s acknowledgement of the need to engage with businesses on proposed changes in the context of today’s economic reality,” said FCA CEO Mary Aldred.

“Every franchise business has a different business model and in this economic climate any proposed regulation needs to have a considered analysis of any potential business impact (similar to the auto dealership code process).

“The Government has consulted heavily through the franchising taskforce but, this was prior to Covid-19, bushfires and an economic recession. Furthermore, consultations are almost a year old and business strategy has shifted dramatically going through the pandemic,” said Aldred.

However while the announcement of planned franchising reforms was also given the thumbs up by Australian Small Business and Family Enterprise Ombudsman Kate Carnell, she expressed disappointment at the prospect of further consultations.

“I remain concerned that the response’s commitment to ongoing consultation will further delay the changes that everyone in the sector know are sorely needed.

“I appreciate that this can be a complex area, but it has now taken a full 18 months for the Government to respond to the Parliamentary Joint Committee report.  Further consultation and delay in effecting change is unacceptable and will continue to heap pressure on small businesses during these extremely difficult times.”

The Government response incorporates the functions of the Franchising Mediation Adviser into the Ombudsman’s office.

“This is a welcome change that we and others have been advocating for over some time now  that will help us more effectively resolve disputes” Carnell added.