The Federal Government is set to review the effectiveness of the current franchising regulatory framework with the aim of ensuring positive commercial relationships, fair trade, confidence, and vitality in the Australian franchise economy.
The review will be chaired by former ACCC Deputy Commissioner Dr Michael Schaper, who will look at the ‘general fitness’ of the Franchising Code; enforcement and dispute resolution mechanisms; the role of the Code in regulating the automotive sector; the impact of increased penalties; and the how the Code interacts with the Franchise Disclosure Register.
The move has been widely welcomed, including by the Australian Small Business and Family Enterprise Ombudsman Bruce Billson.
“Franchised business models enable a very significant contribution to the Australian economy, and franchising, when done well, can be a terrific mode of entrepreneurship,” Billson said. “The regulatory framework plays a vital role in supporting the informed commercial decision-making and the positive, mutually supportive relationships at the heart of successful franchising. And this review will help to ensure the framework is fit-for-purpose at this time of change and dynamism in the small business economy.”
“It is also appropriate to check in on how more recent changes are operating, whether the disclosure ethos that underpins the Code is being fulfilled and compliance considerations for the duties and obligations the regulatory framework imposes,” Billson added. “Dr Shaper is a wise selection as reviewer as he well understands how Codes can support fair commercial conduct and positive relationships, as well as how public policy and regulation can lay the ground for a business to compete, but not predicate whether a business is likely to enjoy success.”
Recent statistics published by the ASBFEO in relation to its mediation services and dispute resolution support function point to the importance of accessible and effective dispute resolution under the Franchising Code, with approximately 15 per cent of all contacts made to the ASBFEO relating to franchising matters. Over the last 12 months alone, the ASBFEO has provided active case management over 150 disputes in its dispute resolution role under the Franchising Code, some involving multiple franchisees of a single franchise system.
The ABS also reported 4.4 per cent of Australia’s businesses were operated by franchisees in 2016-17. They are particularly common in retail trade, where 17.8 per cent of businesses were operated by franchisees.
