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Franchise code of conduct reduces dispute

THE mandatory Franchising Code of Conduct introduced last year is seeing growing acceptance from the industry. Originating from recommendations made in the Reed Report, the code of conduct is an element of the Federal Government’s ‘New Deal: Fair Deal’ package.

The report findings indicated that franchising was suffering one of the highest levels of litigation and dispute in Australian business.

Australian Competition and Consumer Commission small business officer Siobhan O’Gara said a lot of smaller businesses were expending time and energy they could ill afford in trying to resolve disputes.

“In many cases, issues were left unresolved because small businesses simply didn’t have the money to go into lengthy litigation procedures.”

Ms O’Gara said the new code addresses these issues, unlike the voluntary code that existed prior to the present code of conduct.

“Being voluntary, it didn’t apply to all participants — and for that reason it was unenforcable — and there were no effective sanctions if it was breached in any way.”

Franchising Council of Australia president John Groppoli said the new code would get rid of poor performers in the industry.

“Those organisations that are well established and well organised should have no concerns about meeting the code,” he said.

Mr Groppoli said the code does have its deficiencies.

“There are a number of drafting inconsistencies, and what I consider to be ambiguous provisions, and I think that in itself is making life difficult for some franchisors, bearing in mind the code requires strict compliance — you don’t want uncertainty in the document,” he said.

“Secondly, in the way the code has been drafted, I think it has been tailored to traditional retail franchise operations such as Retravision or Granny Mays, or similar types of franchise where you have a dedicated store, dedicated territory, authorised products to sell and so on.

“What the code has failed to do is recognise the service industry based franchises. The code should perhaps be reviewed from that point of view to incorporate both product and service based franchises.

“The code will be reviewed in earnest in 2000 by the Franchising Policy Council, which is comprised of franchisees, franchisors and independent advisors. They’ll look at how the code has been performing during this term.”

Ms O’Gara said the industry was currently experiencing a settling down period.

“But I haven’t detected any panic. The requirements are not onerous,” she said.

Mr Groppoli said the ACCC were highly supportive of the franchise industry and were not taking a purely ‘rap across the knuckles stance’ to code breaches.

“They provide guidance and counselling, and I think they’re looking to help franchises do the right thing, rather than being just a regulatory body. They’ve taken on the dual role of policing and education,” he said.

“With half a million dollars funding from the Federal Government to ensure compliance, there have been fears that they may be somewhat heavy-handed with breaches, but we’re yet to see that.”

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