27 October 2014

Address to the National Franchising Council National Franchising Convention, Sydney


Check against delivery

It is great to be back with you and I want to thank you all for all you are doing for the economy - for your enterprise and your contribution to livelihoods and prosperity for our nation.

And that is where we've spent a lot of time over the last 12 months. At the last conference on the Gold Coast I outlined broadly the direction we were keen to travel in in terms of reforming the Franchise Code.

Like you, I was concerned to see certain state jurisdictions venturing out and contemplating separate regulatory regimes and undermining the national and consistent approach that we've valued and embraced, and I think is one of the reasons why Australia is the franchise capital of the world.

We've worked very collaboratively together. May I thank Michael and all the FCA that have spent an awful lot of time in close proximity, probing deeply into the revised code with Treasury Officials. They have put in an awful lot of time, and how about we show our appreciation for that enormous contribution. Thank you Michael.

I promised you we would be a "no surprises" operation and that has meant a great deal of collaboration.

Kim de Britt has boldly given you most of the detail already and I thank him for that, in a facetious sense, but no, he did put on the front… what was it? "We think it might look like…" and then basically ran through the entire code. So I don't know that will stand up to scrutiny honouring our confidentiality arrangements, but his perspicacity is quite spectacular and he has captured the essence of much of the code.

We have been very collaborative and that has added to the time frame of the preparation of the code. I was hopeful it would be enacted earlier than this, but I promised you we would collaborate carefully. This is exactly what we have done.

And we have ended with a product that will encourage innovation and investment, support further growth and above all help to guide the conduct with a very particular kind of relationship that is at the heart of franchising.

Now, I don't want to pre-empt the Governor General and the Executive Council because that would be bad form of a Cabinet Minister, but there is a meeting in coming days to see the code enacted as a legislative regulatory instrument; that means it has life and application.

The start date is the 1st of January. I know that's not too far away but again I did undertake extensive consultation with the sector and I think we have got a better result because of it.

One of the things that the lawyers in the room were hoping for is that all the disclosure documents would have to be changed, so they're all fresh and brand new and spunky. I regret to advise the billable hours that are amongst us, that that will not be the case.

Your existing disclosure documents have a shelf life well into next year so that there is an orderly and seamless transition to the new code arrangement.

The code will have the tools and teeth that it needs but it will also make sure that it is a 'lighter touch'.

There's about $8.6 million worth of regulatory savings in what we're proposing and again, I apologise to the lawyers in the room, those short form agreements and disclosure documents that no one ever used, will no longer exist. In terms of relationships that you have with an international franchise system where there's a lead franchisor, the relevance of that will be captured in the disclosure document to prospective franchisees. You don't need to have a show and tell and everything that is involved with those international relationships.

We've had more than three dozen submissions, countless hours of collaboration, and I think the outcome is extremely good.

You know I've been on about this for some years. I apologise for the tedium with which I've banged on about this topic for nearly five years, but I am genuinely proud of the result we've got to together and feel that it is a wonderful platform for further vitality in the franchise sector.

It will promote growth. It does reduce compliance costs and the red tape burden. It does ensure that participants follow the best practice principles that we all want to celebrate and see enacted and it maintains that nationally consistent framework that all of us have been keen to see.

So for the states that thought they might want to get involved in this space, our message is simple – there is no need, no good cause in fragmenting the regulatory framework.

The necessary changes have been developed and will commence from January one, 2015.

Now there will be a new obligation on all parties to act in good faith in dealing with each other. The code captures the common law obligations and definitions but there will be some guidance available so that parties are aware of the kind of conduct that we're looking for.

The streamlining of the disclosure arrangements I've touched on, trying to make sure there is that informed relationship.

And the other thing that we've spoken about previously is where there is that emotional commitment to sign on long before a prospective franchisee has the slightest interest in the disclosure document. Now, what we've agreed is rather than get to a point where there is some pre-qualification process, or the need to have compulsory training -that is not my style and not the Government's ambition - but we have said when there is that early sign of genuine interest we need to provide an information disclosure that basically says 'this is a business. Not all businesses will succeed. There are risks and challenges and opportunities, make your decision wisely'.

And we're hopeful that that early awareness raising will build strength and confidence and that people will do what we encourage them to do and that is examine those disclosure documents carefully.

Restraint of Trade clauses - this is an important area. I think we've got the balance right there, that's where there is a reasonable and balanced restriction on the enforceability of Restraint of Trade clauses. This will also ensure that the franchise systems' intellectual property is protected. I know that was of great interest to many of you.

In the area of CAPEX - that unexpected and spectacular demand for CAPEX that wasn't foreshadowed - again there is a sensible way in which that is dealt with to make sure that it's not unduly restrictive but there is an opportunity to manage the franchise system and make well-justified and business-savvy investments in the system.

Now the transition in this area is an important one, as I was saying earlier, the approach is not to have a mad rush and have Stephen Giles pay for his next house by revising all of the disclosure documents. The existing documents will have a shelf life until 31 October, so there's no reason to feel a screaming need to go and do a number in all of those documents, but this will set in train the transition that we're looking for.

I might leave it at that other than to say I'm on about energising enterprise. I see you all in the room are part of that shared purpose. I'm incredibly optimistic and proud that we see a new era of franchising dealing, after seven or eight reviews, lots of chatter about the need for change, some uncertainty about state intervention and a fragmentation of the system, I think we've nailed it. We have done it together; a new era begins in the next few days.

I'm proud of what we've produced together; this is a good piece of work. Many of you in this room have contributed significantly to it and now we can get on with the business of creating business and opportunity.

Enjoy your breakfast and thank you for having me.