Australian Joint Parliamentary Hearings Moves To Second Stage
CANBERRA, Aus. (Blue MauMau) - The Australian Joint Standing Committee for Corporations and Financial Services have begun posting the submissions received into their Inquiry into the Franchising Code of Conduct on their website.
The first stage of their Inquiry was the call for written submissions, which closed on the 12 September.
The committee have posted 140 submissions on their website, with more to come. Unfortunately most of those posted are confidential and so are not accessible. Those that can be viewed make interesting reading.
The written submissions can be downloaded.
The next stage of the Inquiry involves the Committee conducting Public Hearings around Australia during October. The dates and locations are:
- 9 Oct - Sydney
- 10 Oct - Brisbane
- 17 Oct - Canberra
- 24 Oct - Melbourne
- 30 Oct - Perth
These hearings are open to the public so it is expected that they will get good media coverage as well.
Three former franchisees of the Bakers Delight franchise (COBS in Canada) have been invited to speak at these Public hearings, including myself. I have been invited to address the Committee in Canberra on the 17 October.
Ms Narelle Walter and Mr David Bombarra are both scheduled to provide their evidence in Perth on 30 October.
In these public hearings, witnesses are protected by Parliamentary Privilege which means that they have immunity from civil or ciminal action and cannot be sued or prosecuted for anything they say or do in the course of the proceedings. Parliamentary Privilege ensures that a witness can speak without fear of retribution from the franchisor.
This will make the public hearings a very important part of the Inquiry. The Committee is due to hand down their final report on 01 December 2008.
Re: Australian Joint Parliamentary Hearings Moves To Second Stag
I just hope something good comes out of the enquiry, I have 6 years left on my agreement and the last 4 have nearly destroyed me, my wife, our close family and surely affected our two young children even though we have tried our best to shield them from the horror of being a franchisee in this war like enviroment. United we stand.
Re: Australian Joint Parliamentary Hearings Moves To Second Stag
Richard Solomon should read ALL the available submissions to the inquiry before launching into a criticism of them.
There are several submissions from legal practitioners NOT allied to the franchisors. One in particular, from Dr. Elizabeth Spencer (curiously an American with most of her legal education in the US) is a standout in its analysis of the issues facing franchisees.
And while many of the franchisee horror stories are written by angry and illiterate ex-owners, a number of the withheld submissions are from active and successful franchisees, including a large number from one of the most abusive of the franchisors, Allied Brands. (ABQ). Over a dozen franchisees for Baskin Robbins Australia (for which Allied is master franchisor) have outlined a horrific story that is so unlike the Baskin experience in the US it makes you wonder why the good franchisors have ceded so much control to local, inexperienced operators. The Senate inquiry has already noted the dodgy franchise sales practises by ABQ.
Likewise a large number of submissions deal with the organised stripping of successful KFC franchisees by Yum Brands. This event alone has been the catalyst to getting many of these longstanding grievances addressed.
Sadly, without some tort and legal reform in Australia there is no access to legal redress for disgruntled franchisees even when they have a well-documented case.
3 Australian papers of interest
Prof. Spencer's writing is accessable to those with basic knowledge of the law, and some of her papers are on the internet (click here for short paper and PhD dissertation click here ).
Also of interest is Prof. Buchan's writing (on when zor goes bankrupt, click here ), particularly given the surge in franchisor bankruptcies, with more on the way.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Australian submissions predictable
Some of these submissions are expensive works of art. Professor Warren Pengilley [Special Counsel – Deacon’s Lawyers (FCA)] offers up a brilliant mix of obvious fact and legitimate assertions overshadowed by amazing distortions and fabricated argument. Bottom line; he agrees that there are problems in franchising. But they are not very serious and definitely should not be cause for any real change. It simply needs a tweak here and tweak there but it doesn’t need a tweak everywhere;
“Specific regulation is not justified unless the power imbalance in a franchise arrangement is that the whole or a substantial part of the franchisees business depends upon the franchisor’s trademark and marketing system.” “Franchising obligations under the Code are [already] onerous.” The professor suggests that there is already “significant protections” and “some of which are criminal (see par 9.2(b))” but a read of 9.2(b) offers no mention of any criminal options. He argues that there should be no criminal enforcement as the present regulation is “civil in nature”. We have not as yet seen an FCA, Deacons or IFA submissions but we do have Ted Bundy jumping into bed with Gary Ridgway where the Shopping Centre Council of Australia tells us there is no evidence of a problem in franchising that would justify strengthening the regulatory framework. I doubt it will be lost on the committee that SCCA has a similar problem in Australia where it’s members are coming under increasing scrutiny for abuses of an imbalance of power.
SCCA obviously has concerns that this Inquiry and the Productivity Commission’s Retail Tenancy Report on this sector (which in terms of information and power imbalance has similarities to the franchise sector) may put tenancy abuses up for stiffer “government intervention into contracts through retail tenancy or other regulation.”
Professor Andrew Terry [FCA researcher and Deacons Lawyers’ consultant] suggests that government are incapable of effective regulation and suggests that the only alternative is to better educate franchisees. He does not refer to the lack of present disclosure rather; he suggests that to give more information is not only unnecessary, it is “self-defeating”.
“Australia’s franchisees operate within the world’s most protective regime – legislative scheme comprising the Franchising Code of Conduct and prohibitions on misleading and unconscionable conduct. The Code requires franchisors to make comprehensive prior disclosure to intending franchisees. Over 200 separate items of information must be provided.”
Philips Fox [Lenards lawyers & FCA member] informs us that Australian courts already have “good faith” and “unconscionability” covered but they neglect to mention that historically very few access Australian courts.
The vast majority of submissions support the argument for a total re-work of franchising regulation in Australia but most are now anonymous. This in itself should sound alarm bells where we could expect that mostly anonymous franchisees fear some form of reprisal and some franchisors want to avoid being associated with or supportive of undeniable franchisor abuses.
There are some heavy insights and recommendations to be published over the next fortnight where the committee has struggled with an avalanche of submissions. They have also saved the rest of the FCA BS club until last.
Credibility isn't always for sale
Not all the submissions by lettered professionals are in favour of the franchisors. Indeed there are many on the website that are arguing that the current franchising code of conduct needs to be completely overhauled.
The professionals that the FCA and its franchisors with their special counsel have not managed to buy are recommending a raft of changes, from the introduction of good faith to meaningful disclosure,from the introduction of substantial penalties such as a criminal conviction to an independant ombudsman or tribunal.
The long told FCA spin of everything is well in the worlds best practice is now seen for what it is. Equally the statements about the disclosure regime being comprehensive are also now very thin. Yes there are many items disclosed but now it is time for the important facts also to be disclosed rather than the colour of their socks. Even better, it is now time for the disclosed information to actually be held accountable and verified.
Not all opinion can be bought and there are already several well researched independant submissions calling for change. The academics are now no longer solely on the side of the franchisor dollar.
There are also intelligent and articulate ex franchisees lining up to tell their stories. They will be speaking from experience. I am looking forward to hearing what Deanne de Leeuw has to say.
The FCA is justified in their concern about this enquiry. As expressed by the words of the FCA chairman (John O'Brien - Poolwerx franchisor) "lets not let turkeys kill the goose that laid the golden eggs". John, not only are the golden years for franchisors coming to end there is going to be egg on some FCA faces once this enquiry is finished.
It works because....
The IFA - its Aussie equivalent - provides a budget for the presentation of "professional" competent sounding rationalia for the franchisor position.
Opposing that view are sob stories from ruint franchisees. The franchisors win by default, just as they do in the USA, and for the very same reason.
You cannot overcome professional, research sounding presentations with sob stories.
If franchisees don't pony up a budget for professional presentation of their really worthy positions, they will always lose out.
There is no free lunch. Franchisee concerns are capable of very competent and reasoned explication, but not without putting financial resources behind the project.--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
That be the problem
It isn't whether the need is great or the moral "thing" is for government to act responsibly. He who has most dollars wins .... almost ..
There comes a time where people with legitimate argument and the truth of historical consequences comes through.
It isn't difficult to research franchising disasters. It isn't difficult to find intelligent franchisees to argue.
It seems the only problem is the weighing of dollars. If you accept that dollars wins then you have no faith and you should dig your own hole. And don't ever contemplate a franchise.
Richard, is it possible that elected "people" in the Australian government have principles or do we have to buy them with rehetoric? I ask you because you appear to have no faith in much at all simply because all experience leads to manure. There are triggers for eventual change. Anyone know what they are?
[Michael - "Oh for goodness sake" has been done to death]
My take on it is that the government of Australia is no
different from the government of the USA or any government in Europe.
Except for great cataclysmic events - abolition of slavery after the slave business started dying off economically anyway - it is historically very rare that governments do anything by way of regulation that is not simply minimally responsive to disasters. Franchising is not viewed as a disaster that requires that kind of intervention. Moreover, it is believed that there are already private resources to prevent franchise abuse, and that franchisees simply fail to use them/invest in the resourtces that are there.
If you look at great movements that lead to justice enhancement for some group, the most obvious example is the civil rights movement in the USA. Why did blacks get voting rights protectoion and equal rights under law (at least in theory), while women could not get the ERA Amendment adopted?
The single answer for this enormous difference in results is militancy. Militancy requires enormous investment. If you are poor, your militancy must come in the form of active resistance. The Black civil rights movement in the USA involved massive personal involvement and the willingness to sacrifice life and limb to realize what the Constitution said was the law of the land - equal justice under the law. The incredible investment of sweat and blood - real blood - by the civil rights leaders and followers of the 1960s brought about the kind of adjustment in the USA society that has now flourished into the possibility of a black man becoming President of the United States.
The ladies, on the other hand, confined their militancy in support of the ERA to wine and cheese parties and burning their underwear. I gave a talk to a women's rights gathering back in the 1970s in which I told the audience that what they called militancy was child's play and nothing more, They were enraged and demanded that I immediately tell them what would work. Not being politically correct, I told them that if they crossed their legs for six months and no man was able to enjoy physical intimacy, the ERA would be adopted. Instead of being moved to action, they were affronted, and their precious ERA died.
Franchisees are not in any way militant about anything. Their willingness to talk about their sad experiences always falls on deaf ears, and yet they keep on doing it over and over again. The reaction never changes if the stimulus never changes. Claims that your definition of justice deserves better treatment for franchisees has never worked. Those claims did get franchise investment laws adopted, but, as we all now know, those laws have few teeth, and their enforcement has fewer. Only private remedies work under those laws, and few franchisees have adequate resources to make the fight. Contingent fee damages cases are not producing recovery of lost fortunes, and even where there is a big judgment, bankruptcy erodes its value even more. After reductions in recovery that occur simply as a matter of how these large class actions work, there is the matter of additionally deducting the expenses of the effort plus the attorney fee contingency percentage. You do the math. The class members get chump change in most instances, even in their best victories.
History shows emphatically that whining about your sorry circumstances and pleading for justice helps franchisees no more in parliament or congress than PETA helps in preventing municipal dog pounds from euthanizing unwanted animals.
You will make the decision to get together the kind of financial resources to support competent advocacy or you will continue along your present path - the path to nowhere. --
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Q for Aussie zees
Leaving aside Solomon's obsession with ladies lingerie, the attempt to pass the Equal Rights Amendment (ERA) is pertinent to franchise regulation the United States and perhaps Australia.
As Prof. Shaman notes in his new book , the ERA did become law in many states due to the federal nature of the American legal system. In a like vein, what little franchise relationship legislation exists in the United States is at the state level.
Not being descended from convicts, I am unfamiliar with Australia. Therefore, my question for the Aussie members of BMM is:
To what degree can franchising be regulated below the federal level in Australia?
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Regulation below federal level in Australia?
The states were formed before federation in Australia. This meant any power that the commonwealth has was originally ceded to it by the states.
Broadly speaking, the commonwealth legislation concerns Australia's relationships with other countries (including implementing treaty obligations), the economy and defence. Over time we have arrived at a situation where the commonwealth (federal level) regulates corporations (Corporations Act 2001 (Cth) and ASIC Act, anti trust and consumer protection (Trade Practices Act 1974 (Cth) and (Franchising Code of Conduct), intellectual property, corporate insolvency and personal banktruptcy and most taxes. You'd need a long lesson on Australian constitutional law to see why some of these things are with the commonwealth; it is not always immediately obvious.
If an area was not clearly assigned to the commonwealth then it is probably regulated at state/territory level. Interestingly, in the light of 21st century concerns, this includes the environment. When the Australian Constitution was enacted, the natural environment was a resource that was taken for granted.
The states and territories legislate about property, local taxes, hospitals, schools, roads, etc. The areas where the states and territories legislation may impact on franchising are sale of goods, unfair contracts, employment and industrial relations within the state, retail leases, business name registration, relationships like partnerships that do not fall under the Corporations Act.
There is sufficient difference in the laws from state to state for franchisors entering Australia to pay attention to the state/territory that is to be named in the 'governing law' clause of contracts.
Jenny Buchan, Australia
Aus federal regulation
The states are unlikely to introduce anything meangingfull by way of protection for franchisees although South Australia had threatened to before the federal government started this inquiry. It remains to be seen whether that will be on the table after this inquiry. I doubt it.
States such as Victoria offer dispute resolution services but they are yet to yield anything reasonable as an outcome. Same deal - more money wins. The states presently don't have much else to offer but when you consider the South Australian threat it is theoretically possible. But everyone seems to agree it would be unworkable in this country to have franchises operating under different state laws.
Paul; on a more serious matter - Australia is one of the most multi-culural countries in the world and we are proud that our forefathers were individually selected by panels of the best judges England had to offer. Solomon's obsession with ladies lingerie amongst so many other obsessions would have found him highly regarded by the judges.
My personal thoughts about franchising in Australia are that
it might be a wiser move for Australians to have their own home grown franchises rather than import the diseased American model.
My limited experience with Australians informs me (hopefully correctly) that their community is sufficiently compact that the anonymity that facilitates scandalous conduct tends to be lacking. Where you are locally known, it is harder to get away with unethical conduct and keep your reputation in tact. It is probably much easier for word to get around in Australia tthan it is here.
There is certainly no magic associated with American franchise models that could not attach to home grown business models that could do rather well on the lesser available number of units that Australia would likely accomodate.
I suspect that Australia mnay have more of an opportunity to create its own franchise model on a higher ethical plane than anything they could ever import from the USA.--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
We have a shot Richard
Australia has modeled franchising from the US and there are some that work and some that work very well. We have some great franchise products and there are a number that are being exported. However, while the internet offers franchisees education and a voice, it has also allowed Australian franchisors to learn from the US just how easy it is to screw franchisees even when it wasn't a mandatory element of an imported US product.
We see very little light at the end of the tunnel but with no alternative we will see where it leads us. All posturing aside; we have a shot. We are confident that we are to change law.
We are not confident that all issues will be addressed. We believe a "good faith" clause will be introduced and we expect that we will see the ACCC will be given a greater ability to investigate and prosecute. We do not have any idea how far the Committee will go in regard to the requirements for disclosure, due diligence and education. After the Committee recommendations it all goes to Parliament for debate. Before then we have a lot of work to do .... but it is already going well.
If it all ends as another franchise joke then militancy begins with a rush. Perhaps we could use a variation of Richard’s advice and then lobby the wives and husbands of our political leaders and get them to cross their legs for franchising. It might not achieve much but why not enjoy such media opportunities.
Today in Sydney we see DDL sitting through a number of speakers at the public hearing in Sydney. Tomorrow I will sit through similar presentations in Brisbane. Everything is predictable except what questions will be raised by the Committee. Early indications are that the Committee can see through the clever mixture of obvious truth and weak counter-argument. The questions should tell us much.
I would dearly love to be part of a home grown
movement to plant this very fertile soil with some really good seeds.
I have little faith in government regulation as the avenue to success, as you well know by now.
But if there were just a few Australian franchisors who had a good enough model that they could make it handsomely without the chicanery, those good franchisors would create a competitive field to which others who might lack integrity would have to adhere in order ot sell franchises.
There are very sound alternatives to government regulation, but you have to have a guerilla mentality to see them.--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
You would be welcome
and we are getting close to a level of confidence.
The talk of registration and accessible franchise offerings would allow franchising to be competitive. The quality franchisors would automatically set the standard. This combined with the other positive regulatory suggestions being openly discussed with strong argument for change could see Australia with something worthwhile. Those resisting with BS on the table have to date not been competitive where the Committee have sharp and impressive interlects.
The Committee is genuinely digging for workable solutions.
So you've read my CV
We follow an understood path and the end game will be justified by the practical walk.
There are some interesting possibilities for good franchising once the ugly is recognisable - improbable yes - but possible. This is a very fertile and differnt playing field. Without any real effort as yet we know that already at least 1/3 of the House has had some contact with horror franchising. And the numbers continue to grow. The media for a number of markets is accessible.
And Richard, Gerry Harvey is a classic example of writing a better book on franchising - less complicated give and take and more profitable for him, his franchisees and every business that pays to be within 200 yards of his franchises. And he doesn't give a damn about the ACCC, the FCA, the Code, politicians, the inquiry or either of us - life's just too good for poor 'ole Gerry.
Australia’s Freedom of Information joke
FOI in Australia is described by John Hartigan [CEO News Ltd]; “The cost of fighting some of the battles is now so crippling that it does .... silence us when we should be heard.”
Freedom of Information and Freedom of Speech are closely related when denied. Freedom of Speech in Australia is rated 35th on the world stage – a mile in front of Russia – but miles behind anything close to transparent democratic governance.
This is the stuff of the Deanne De Leeuw attempt to get through FOI, the details of the so-called ACCC investigation of Bakers Delight where only a few months of “investigation” was denied behind the blatant lie that it would take almost 3 years to compile the reports [at a quoted cost to DDL of more than $150,000]. The message here, and eloquently stated by Joanna Gash MP, is that all ACCC investigations into franchising complaints have been a sham.
Australia’s ‘fair go” has been sacrificed to protect anyone in government from “embarrassment”. We now see the Australian Federal Police being used like sniffer dogs to intimidate. The triggers for change when government resists change has always been the same. Lots of loud, persistent people who won’t go away and who don’t give up and who won’t accept any more crap.
While this Committee is to address regulatory structural needs they have understandably elected not to involve emotive speakers. We just hope they do not de-humanise this inquiry and amidst the complexities of the issues lose any level of consideration for present and future victims.
Building an effective regulatory frame work will be difficult and convoluted work but the Committee needs to get past that and accept that it has to be done. This inquiry and the parliamentary debate to follow can be a stand against corruption or this can end as evidence that people don’t count in Australia.
the problem
I'm not sure what you are referencing by the quotes.
The typical franchise regulatory scheme only addresses prepurchase or presale disclosure, and does not concern itself with the ongoing business relationship.
Even relationship franchise regulation does nothing to establish the parameters for a vile ball independent franchisee Association working in collaboration with the franchisor to establish the brand.
Michael Webster PhD LLB
Franchise News
It isn't about franchise regulation
It is about the lack of effective franchise regulation supported by a convenient lack of access to freedom of information in Australia when the regulator needs to protect his butt.
Freedom of Speech - it is related but it isn't in this context. It was still worth reading that article to know that not much changes where ever you are.