Australian States Closer To Franchisee Fair Go

South Australia and West Australia have moved a step closer to state franchising dispute resolution with the introduction of Small Business Commissioners.  The Franchise Council of Australia continues to bleat while details of suggested moves in New South Wales and Queensland remain unclear.

Western Australia is the latest state set to install a Small Business Commissioner, following in the footsteps of Victoria, South Australia and, potentially, New South Wales.  StartUpSmart

With NSW set for a landslide Liberal/National change in government the promised NSW Commissioner role does not specifically mention franchising although the NSW Chamber of Commerce did recognise the franchising need.

Mr Page laid out a six point Small Business Action Plan (SBAP) to support small business in the State if the Liberals win the election. The creation of a Small Business Commissioner was chief among the proposed changes, a position which was created in Victoria in 2003.  Alternative Media Group

South Australia’s creation of a Small Business Commissioner and the impending introduction of new laws to protect franchisees appear, like West Australia, to have majority parliamentary support. 

The legislation will be based on the successful Victorian model and the results of the Economic and Finance Committee’s 2008 inquiry into franchising laws, which was chaired by Minister Koutsantonis.  South Australia Biz

Member for Gympie, David Gibson, proposed state franchising legislation in 2010 with the Queensland Parliament set to hear more in upcoming sessions.  All states are essentially basing reform on the acclaimed VCAT small business tribunal model with South and West Australia adding specific franchising legislation.

One of the concerns with the Queensland and New South Wales proposals is that so far there has been no mention of ensuring the Commissioner, or possibly a Tribunal in Queensland, has the capacity to resolve legitimate complaints.  In neither state, unlike West and South Australia, is there mention of introducing an ‘explicit good faith’ obligation for franchising.

There is no doubt that the VCAT mediation model works for small business generally however, Victoria does not have an explicit good faith obligation and the almost total lack of VCAT franchising outcomes indicate that without good faith the rogue franchisor can rely on the weight of abusive contractual interpretations to override implied good faith and maintain the system of ‘franchisees without recourse’.

As with the federal Office of Mediation Advisor, rogue franchisors could be expected to participate for appearance’s sake and then mount the historical and federally accepted process of targeting complainant franchisees on the way to out-funding them in deliberately drawn out litigation over whatever period is necessary to achieve default wins.

Perhaps the non-effectiveness of continued implied good faith explains why the FCA has not attacked David Gibson in Queensland in particular and are seemingly ignoring the promised Commissioner in NSW.

Without the inclusion of ‘good faith’ any state’s franchising reform could be a waste of time and resources where the ability for franchising stakeholders to have speedy and affordable access to remedy is made impotent.

Abusive contract interpretations would continue to over-ride the virtually theoretical ‘implied’ concept of good faith. Both Queensland and New South Wales have recognised that franchising needs to be cleaned up however in delivering a weapon to do so; that weapon needs ammunition.

Meanwhile FCA representing around 500 members, a few active, from a sector with 71,000 franchisee investments, continue the nonsense suggestion that franchising will dissolve into nothingness in regulated states and that banks and franchisee investors won’t realise increased confidence in the knowledge that the threat of investments with rogue franchisors practices will diminish. Again FCA resort to a nice mix of fact and fiction to assert silly conclusions.

Most franchising stakeholders would be In agreement with Jason Gehrke of Franchise Advisory Centre, Griffith University and director of the FCA and his take on franchisee ignorance of the Law and understanding of the broad range of potential franchising outcomes.  Better and more education is necessary in moving healthy franchising forward but FCA miss that many franchisors too are ignorant of the Law and what are the benefits of healthy franchising relationships and how to be successful without ripping off franchisees.

However while the Griffith franchising education program is better than the dismal rest the Centre for Franchising Excellence appears reluctant to jeopardise any scarce funding by introducing to its program the necessary emphasis on the full extent of franchising risk when prospective franchisees are professionally duped.