Australian Government Upset over Yum's "Unfair" Franchise Practices

CANBERRA, Australia (Blue MauMau) - After an uproar over the closure of a popular 30-year old Rockingham KFC restaurant last week due to non-renewal of his franchise contract, Federal Small Business Minister Fran Bailey vowed last Wednesday to take swift action to fix shortcomings in the Trade Practices Act. In a report by The West Australian, the Minister chastised the government loophole as helping Yum International, a multi-billion-dollar U.S. fast-food giant, in its bid to squeeze out its Australian franchisee.

Minister Bailey said in the interview that the Government had revised disclosure provisions of the mandatory Franchising Code of Conduct this year to ensure overseas companies had to comply with Australian conditions. But she feels this recent closure by Yum highlighted the need for more changes. She stated, "For someone who has been successfully operating a franchise for 30 years to be given no right of negotiation, this simply is untenable and I would move swiftly if we are returned to government to close off this loophole."

Prior to the federal election on Saturday, where Labor candidate Kevin Rudd had a landslide victory over incumbent John Howard, one Labor candidate was quoted saying that Yum's move could not have been foreseen by legislators as it was "unprecedented and aggressive." He said, "They have thought through very carefully how you optimally use the political window created by the election--it is an attempt to make money out of a practice which is unfair, unreasonable and at a time when legislators are incapable of responding."

The West Australian report cited franchising as an $80 billion industry in the Australia economy, which employs more than 600,000 people. Minister Bailey vowed, "Our job is to protect Australian businesses and the people who operate in those businesses and there is no way I will stand by and allow this to happen."

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