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Australia’s largest franchisor with by far the highest revenue appears to hold the key to why the Australian federal government ignored the important franchise inquiry recommendations and continually resisted meaningful legislative reform.
It could be suggested that the franchisor is being protected as its model evolves and it reshapes its relationship with franchisees. And there is a legitimate question of federal government conflict of interest in the decades of downplayed calls to give franchisees a fair go. Australia’s biggest franchisor is in fact the Australian government with the giant Australia Post network.
It made an after-tax profit of just $89.5 million last financial year, compared with $260.5 million the previous year and $400 million-plus in 2006-07. The latest results were hit by a one-off restructuring charge, while revenue was down $115 million to $4.87 billion. The Age
The franchisor for Australia Post’s 3,000 plus franchisees is the single share holder Australian government so now industry analysts are asking what is the relevance of consecutive Small Business Ministers’ failures to act on 2008/9 Franchise Inquiry recommendations and why was tptal transparency sacrificed to hide the obvious conflict of interest.
The Australia Post franchise model is evolving where the impact of 21st century internet and mobile phone technology has dramatically reduced its market and therefore the profitability of the franchisor and franchisees.
To compensate for lost revenue particularly over the last decade many franchisees have introduced new products similar to many items stocked in news agents, gift shops, small electrical outlets and mobile phones outlets.
But in 2011 the franchisor is now set to deliver its ‘Future Ready’ program;
Future Ready will enable Australia Post to do everything it does in the physical world in the digital world
Australia Post will launch an online store next year that will offer tens of thousands of stationery, small electronics and mobile phone products. Australia Post Media Release 21 April 2010,
While the commercial need for Future Ready is understandable the franchisor will in practice be competing online with its franchisees to reverse its declining profit trend. There have been no questions raised or confidence offered as to how further pressure on the sustainability of thousands of small Australia Post outlets under contract will be dealt with.
There are no moves by the Australian government to assist Australia Post franchisees with the change in the market other than to ramp up the closures of it's businesses across Australia and much to the dismay of the public.
Most closures appear to be 'company' locations however there are franchisees wondering if the writing is on the wall when the franchisor loses faith in the future of the model.
POAAL represents Australia Post franchisees, licensees and contractors and is by far the largest brand association in Australia. However it clearly works in concert with the franchisor and therefore conflict with the franchisor to protect the interests of members against a taxpayer level of litigation funding and a power beyond any contract does not appear to be an option.
Franchisors from many brands are increasingly entering into online competition with franchisees in many sectors and that trend is certain to continue. And while such strategies are difficult o argue against this is yet another not so subtle under the radar development stage for many franchise models with potentially dire consequences.
In the case of Australia Post issues ‘being swept under the carpet’ reaches a new level.
It is unlikely that internet encroachment would result in any compensation to franchisees under pre-existing contracts which were entered into without prior knowledge that the franchisor’s online business would seriously challenge the future of the franchisees' financial model as opposed to the promised return on investment they signed on for.
So where is the good faith in cyber encroachment and government conflict of interest?