An independent review of Australia's franchise sector has recommended substantial reforms, including strengthening the obligations of parties to act in good faith and a stronger enforcement regime.
The proposed changes were welcomed by Competitive Foods Australia chairman and chief executive Jack Cowin, who has been a long-time advocate of industry reform.
Mr Cowin has been in a protracted dispute with KFC franchisor Yum! International, and his advocacy of change has put him at odds with the Franchise Council.
Small Business Minister Gary Gray and the Parliamentary Secretary for Small Business Bernie Ripoll welcomed the outcome of the four-month review, conducted by Victorian lawyer Alan Wein.
The report made 18 recommendations including:
• strengthening the obligations of parties to act in good faith in a franchise;
• a stronger enforcement regime including financial penalties for code breaches;
• improving disclosure on issues such as online trading; and
• better dispute resolution mechanisms including regulating attribution of costs to franchisees.
Mr Cowin said the review’s 18 recommendations were a fair and balanced compromise on franchise reform that would work to the benefit of both franchisees and franchisors.
“Competitive Foods is both a franchisor and franchisee and we are confident that these recommended reforms will work to addressing many of the problems that franchisees, in particular, have faced for many years,” he said.
Mr Cowin said he was particularly pleased that many of the reforms reflected submissions made by bodies such as the Australian Competition and Consumer Commission (ACCC) and various franchise peak bodies, including the Franchise Council of Australia (FCA).
“It really does seem that the way is now open for these reforms to get the support of all parties in the federal parliament and have these much needed reforms passed before the September federal election,” he said.
The review follows failed attempts in several states, including Western Australia, to achieve reform of the sector.
Competitive Foods is one of Australia’s largest franchisors, through its Hungry Jack’s chain, and also a major franchisee, with about 40 KFC stores.
It has been in dispute with KFC franchisor Yum! International, which has given notice that it wouldn't agree to the standard 20-year leases on Competitive Foods' KFC restaurants due to Mr Cowin's involvement with Domino's Pizza, a rival to Yum!'s Pizza Hut brand.
Mr Ripoll said the recommendations provided a roadmap for reforms to assist Australia's 73,000 franchise small businesses and the more than 400,000 people who worked in the sector.
"It is the government's priority to ensure franchises, and all small businesses, can continue to grow and develop as an essential part of our economy," he said.
"The government is committed to providing certainty and confidence in the franchising sector.”
Mr Ripoll said he has held discussion with key stakeholders, including the FCA, the Franchisees Association of Australia, the Franchise Advisory Centre, the Australian Retailers Association, the Council of Small Business of Australia, the Australian Chamber of Commerce and Industry, and the opposition, about the review.
Mr Wein was appointed to conduct the review in January 2013. He received 73 submissions and conducted over 30 face to face consultations in the preparation of the review.
