Almost a year after Liberal maverick Peter Abetz proposed contentious reforms to WA’s franchising laws, the issue is still causing division in the industry.
STATE government minister Troy Buswell, the Franchise Council of Australia, a parliamentary inquiry and even some franchisees the reforms are supposed to benefit have voiced strong opposition to the Franchising Bill 2010.
The private-members bill was introduced to parliament by Liberal backbencher Peter Abetz in October last year, and was aimed at levelling the playing field between franchisees and franchisors.
Two weeks ago, the Bill was debated in the Legislative Assembly and was subsequently passed ‘on voices’ on its second reading, with backing from an unusual mix of Labor, Liberal, and independent MPs.
The Bill will now proceed to the ‘committee’ or ‘consideration-in-detail’ stage, however it is unknown as to when this will occur and if the Bill will even be passed at all.
Mr Buswell and senior Liberal MP Mike Nahan spoke out against the Bill, while Liberal MP Graham Jacobs voiced his support.
“When a franchisee is aggrieved under the framework that will be introduced by this Bill, not much will change; we will be effectively promising the world and delivering an atlas,” Mr Buswell told parliament.
Mr Abetz said the progression of the Bill to the ‘consideration-in-detail’ stage was a positive outcome for WA franchisees.
“The fact that it has got through the second reading is a huge milestone for franchisees, because it’s the first parliament in Australia where this kind of legislation has gotten to this point,” Mr Abetz told WA Business News.
However, Labor MP Bill Johnston is not convinced the Bill will progress any further, as the government may refuse to allocate time for its debate.
“I think the Bill has a troubled future, because it’s clear the government will use any tactic available to prevent the Bill being properly debated and voted on,” Mr Johnston said.
The Bill, which would impose a ‘good faith’ obligation and penalties for breach of the Franchise Code of Conduct, is based on legislation introduced into the South Australian parliament by Labor backbencher Tony Piccolo last year.
Australia’s richest franchise owner, Jack Cowin of Competitive Foods Australia, has supported both the Piccolo and Abetz bills.
Mr Cowin, who owns 46 KFC stores in WA, as well as the Hungry Jack’s franchise, has previously said the campaign to have the law changed related to his long-running dispute with the global owner of KFC, Yum! Brands.
However, Mr Abetz said the Bill was simply aimed at addressing the perceived imbalance in the relationship between franchisees and franchisors.
“I was not prepared to stand idly by as rogue franchisors continue to act with impunity in a predatory manner towards ‘mum and dad’ franchisees, that is why I’m pushing on with this legislation,” he said.
The Franchise Council of Australia has been a vocal campaigner against the Bill, saying that state-based franchising legislation has already been explored and rejected by five inquiries since 2007.
FCA state president and franchisor Mike Stringer said there was a misconception that most franchisors were ‘big businesses’, when in fact the majority of franchisors were small business operators.
“There is this belief that all franchisors are huge companies and that all franchisees are all small ‘ma and pa’ outlets; we have 260 franchisees in our system, but my wife and I are just ‘ma and pa’ franchisors ourselves,” he said.
Mr Stringer said the Bill would do nothing more than introduce more red tape for franchisees and would encourage franchisors to be stricter in enforcing franchisee breaches.
The reforms proposed by the Bill include a statutory obligation for franchisees to act in good faith, penalties for breaches of the Franchise Code of Conduct, and additional power to the courts to grant remedies to franchisees.
Norton Rose franchising partner Tamra Seaton said she could see problems with the definition of ‘good faith’, which required franchisors and franchisees to act ‘fairly, honestly, reasonably and cooperatively’.
“The danger of the definition of good faith is that it is very defined ... in a commercial setting it is very difficult to always act ‘cooperatively’ so we would like to see the definition amended or alternatively rely on the common law good faith obligation,” Ms Seaton said.
Earlier this year, a parliamentary committee, known as the Economics and Industry Standing Committee, chaired by Dr Nahan, tabled a report opposing the Bill.
About 90 per cent of the 116 submissions made to the committee opposed the Bill.
The majority of the committee said it was not convinced the Bill was an appropriate measure and found that amendments made to federal franchising legislation during the past three years were adequate.
“I think the Bill has a number of fundamental flaws,” Dr Nahan said.
“If this Bill is passed, it will shift the regulatory power from the ACCC to the state ... and I would argue the state entities are worse placed than the ACCC to enforce a prosecution of legislation in respect of franchises.”
The cost of enforcing the Bill – $4.2 million over the next four years – and a lack of evidence that misconduct in the franchising industry was widespread were cited as other reasons for opposing the Bill.
Some franchisees have expressed similar concerns relating to the reforms.
PoolWerx franchisee Irene Hughes said creating a state-based framework added another level of complication to dealings between franchisees and franchisors.
“I think the national legislative framework for franchising is sufficient,” she said.
“I don’t think we need to add another layer of compliance for franchisees who operate in WA; it may put up our costs in the future and make dealings with franchisors more complicated.”
Competitive Foods spokesman Paul Plowman told WA Business News the reason the Bill was so heavily opposed was because franchisors did not want to shift the balance of power away from themselves.
“What ‘good faith’ does is offer a process for franchisees that are subject to some fairly unscrupulous behaviour on behalf of some franchisors, a level of procedural protection,” Mr Plowman said.
