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Australian Government Fails Franchising

CANBERRA, Australia - Small Business Minister Craig Emerson has tabled his response to the Australian Franchising inquiry. His response lacks leadership on this issue and plays into the hands of rogue franchisors by allowing them to continue to get away with dishonest and unethical behaviour that is just not accepted in other areas of business.

Minister Emerson has failed the franchising sector. Again.

The problems within the sector have been clearly identified; the result of three separate inquiries. The recommendations that were tabled by the Parliamentary Committee last year had full bi-partisan political support and should have been implemented in full. Instead he has chosen to skirt around the edges, establish yet another inquiry, and fail all Australian franchise participants.    

The Minister has failed to implement the two key recommendations; that of good faith and pecuniary penalties for breaches of the Franchise Code of Conduct. His response? Establish yet another inquiry.

Why can everyone else see that Good Faith is integral to Good Franchising? By failing to understand this basic connection, Minister Emerson continues to show no understanding of the franchising sector. It is as simple as Associate Professor Frank Zumbo writes: “All that Minister Emerson needed to do is to amend the Franchising Code to say that "the common law requirement of good faith applies in relation to franchising agreements covered by the Code". Simple.

Minister Emerson will instead submit us to yet another Inquiry, an “expert panel to inquire into and report on the need to introduce into the Franchising Code any further provisions to prevent specific behaviours that are inappropriate in a franchising arrangement.” The panel is to report by the end of January 2010.  So we wait.

Another inquiry is a waste of time and yet another delay; the result of which is that franchisees will continue to suffer at the hands of rogue franchisors. The problems have been identified repeatedly in this sector; they do not need to be re-hashed again. The sector needs action. Consider the money being wasted on these continual ‘inquiries’. That could have been put to better use – perhaps by providing funding to get some of these franchisee cases to court.

The Minister has failed to send a message that non-compliance with the Code and unethical behaviour will not be tolerated within the franchising sector.  

He has failed to implement penalties for the Franchising Code, instead flicked the issue to an inquiry. He has failed to address the problems within the ACCC; giving them powers to “conduct random audits” does not address the fact that it is the ACCC’s failure to use their existing powers that is the main issue. He has failed to address the issues of the termination of franchise contracts and franchisor insolvency. His approach “to provide clarity on the “end of term” is positive, but falls far short of what is needed.

Minister Emerson has shown he lacks the leadership and courage to tackle this issue. He needs to stand aside and let someone else take on the job.

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