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The push to sell franchises doesn't miss a beat and the increased risk in a troubled 2009 is played down. The comparatively quiet voice of independent franchising industry experts have been recommending that this is a time for franchisors to consolidate.
I see very little consolidation out there folks and at a time where most new franchise businesses should expect to have break-even time frames extended and quite possibly extended dramatically. This is a dangerous situation.
There are exceptions where concepts can potentially flourish in an economic slide but even those concepts can be mismanaged as business changes. The push to sell franchises is still on in earnest and franchisors are all out there telling prospects that there model is exception. The sell is on while so much that will influence a new business is turning off.
So where do prospective franchisees learn about franchising and risk? Australia offers what would appear to be universal examples.
The Victorian government does a great job in promoting Business Victoria so you might wonder if there will be fewer ‘mom and pop' operators signing up for shonky franchises in a State that doesn't promote the myth that franchising is safe. How far can we reasonably expect a government website to go in describing the potential for scams? This one doesn't expose the true risk but it is the best of what is available in Australia. Evaluate a Franchise/Franchisor Victorian Checklist
The Australian Federal government's ACCC on the other hand offers up ScamWatch but there is no mention of franchising scams. Here is the new 2009 Franchisee Manual [pdf] however; the ACCC website is such a clumsy user-unfriendly site you have to persevere to find it. Here is an extract;
"The ACCC is active in monitoring the franchising sector for any fraudulent activity and taking enforcement action when and where it detects a breach of the law. The existence of the code and this enforcement action has deterred illegitimate and dubious scam franchise systems from operating in Australia, and has provided a safer investment environment for franchisees."
This was published 3 months after Graeme Samuel [Chairman ACCC] admitted to the Franchising Inquiry that they had only found 3 cases to pursue in the last 10 years. This statement was made after the Inquiry found that 'illegitimate and dubious scam franchise systems' flourished in Australia.
The ACCC website links prospective franchisees toFranchise.NET; "Franchising makes sense because it typically reduces your risk as a business operator to work within an established system and brand versus rolling the dice with a new and untested concept."
Another ACCC educational link - Australian Franchisees Alliance targets business from franchisees and franchisors alike and suggests to prospective franchisees "it may also be an advantage to choose an advisor that is a member of the Franchise Council of Australia."
The FCA then offer up this rubbish and advise; "you will probably need help from a lawyer, accountant or business adviser along the way. Luckily, you needn't go through this process on your own. Organisations such as the Franchise Council of Australia and the Australian Competition and Consumer Commission can advise you at every step of the way."
Everywhere you look on their websites you find the ACCC and the FCA talking about the wonderful new world of available education. In fact they've spent so much time writing about the depth of available education they haven't produced anything worth a damn.
Both organisations have worked hard since the 2008 Inquiry on revamping new versions of the old ‘smoke and mirrors' to build a sham justification for Minister Craig Emerson to do nothing about the recommendations from the Franchising Inquiry Committee. His performance guarantees there will be more Australian casualties and an increase beyond 2009.