BRIAN MITCHELL:
I’m Brian Mitchell, the Federal Member for Lyons, and of course Sorell here is in my electorate. I’m joined by Julie Collins, the Minister for Small Business, Troy Sutcliffe, the managing director of Liv Eat – a fantastic Tasmania franchise operation – and Dr Michael Schaper who is the chair of the franchising review, which is what we’re here to talk about today. Before we get started, I just wanted to say thank you to Michael and Julie and Troy for joining me here in beautiful Sorell. Liv Eat’s been here now for a year, and it’s a real success story here in town, adding some real difference and options for people to enjoy some healthy Tasmanian food. Julie, this is your show, I’ll leave it to you.
JULIE COLLINS:
Thanks, Brian. It’s terrific to be here with Brian and of course Michael and Troy. What we’re here to announce today is the government’s response to the franchising review. Everybody goes into a franchise pretty much in Tasmania. You know, people don’t realise that they’re going into a franchise, but Liv Eat is a great Tasmania franchise. So it’s terrific to be here with Troy for this announcement today.
Dr Michael Schaper has gone through the franchising code. We’ve done extensive consultation with franchisees and franchisors, and what we have agreed to do as the government is agreed with all of his recommendations, we’ve agreed in principle with every recommendation. What these recommendations will primarily do is to make sure the franchisees – that is the people who run the stores or the operations on the ground – have a reasonable opportunity for return on their investment. We want to provide them low cost access to justice if there’s any disputes. What we want to do is to make sure that people have a fair go, both the franchisee and the franchisor. And that’s what it’s all about.
One of the significant recommendations was that we investigate a licensing model for franchising in this country. We will step up a taskforce in the Treasury in Canberra, to talk to and to consult with franchisees and franchisors and more broadly about whether or not the licensing model is the right way to go. We’ll have a look at how it might work and what it might do. We want to, of course, long term reduce red tape for both franchisees and franchisors and to make it easier to do business. That’s what the review of the franchise Code is all about. It’s about making sure that both the franchisee and the franchisor have a reasonable opportunity to make a profit on their investments. But importantly, to make sure that everybody gets a fair go. And I might hand over to Michael now to say a few more things about review.
DR MICHAEL SCHAPER:
Thank you, Minister. As many people will be aware, franchising over the years has had its fair share of both opportunities and also a number of disputes. And in this review, we’ve tried to identify the ways in which we can reduce the level of disputes, encourage more people to either grow their franchise or enter into the franchise sector, and to ensure that franchisees have a reasonable opportunity – as the Minister said – to make a return on their investment. More fundamentally, we’re also suggesting that we move away from a highly legalistic framework into one that is far more based around the needs of the sector, both franchisees and franchisors, by introducing the possibility of a licensing system, which will legally move to some of the world’s best practice in terms of franchising regulation. There’s a long way to go. I’m very supportive of not only the government taking on all the recommendations, as I would be no doubt, but also want to thank them for that support for it. It’s been very well handled by Treasury. I think we’ve got some real opportunities now to reduce disputes, grow the sector, and we’ve also been able to shine a bit more light on the size in the sector and some of the challenges that it’s got facing it.
JOURNALIST:
Michael, can you give us an example of a dispute that this review, I guess, might address now or might help a little bit and just go into it a little bit more.
SCHAPER:
One of the areas in which we’ve often seen disputes occur between franchisees and franchisors is when change occurs in the franchise system. So for example, the franchisor might say, ‘markets moving, we’re going to change how we deliver, how we offer services’, but as franchisees, you’re also going to have to make some changes as well. Some systems handle that really well and some have done that very poorly, has been the experiences we’ve gone through for this review. One of the recommendations we’ve made is that many of those franchise chains need to start doing it better. What does happen at the moment is that franchisees are disgruntled. They either have to try and resolve it correctly. If they can’t do so, they do have an opportunity to try and use a small business commissioner service. But ultimately, if not, they need to go to the courts and there’s been no for small businesses – court based experience are lengthy, hugely expensive and rarely give people justice in the sense of a solution that allows people to get working going forward. It’s a very arbitrary and difficult process. So we want to move away from the highly legalistic approach of many of these models to one much more where franchisees and franchisors can feel at ease, resolve their disputes with an intermediary.
JOURNALIST:
There has been a lot of devastation caused in the past, devastation caused to workers and franchises in the past. So can Australians have faith that something will be done to improve the system?
SCHAPER:
I think we very much can. We are one of about 30 countries around the world that have specific franchising regulation. And indeed, over the years, a number of other countries have used the Australian model as their starting point. What we do want to do though, is we need a better understanding of the sector. We also need to make sure that although we’d got dispute resolution in place, we know that we can make it better. We can, as this review has suggested, make a number of changes that will make it easier. For example, the ability of the Small Business Ombudsman to call out franchise systems that won’t participate. For the suggestion that perhaps also parties can go to the courts and hopefully not be hit by huge fees. To do that, or for the Ombudsman to collectively represent a large group of franchisees with common complaints. And at the same time, for problem franchisees to get out of the sector – out of the system – without bringing everyone else down as well. So they’re a couple of small, practical measures, but there’s a lot of them contained in the report itself.
JOURNALIST:
Is there an encouragement for not just people being punished for maybe doing the wrong thing, but are there incentives for people to be doing the right thing as well?
SCHAPER:
Well, what we’ve got at the moment is we’ve got a system in the franchising code where there are some penalties, but one of the grave anomalies is we’ve got penalties for some breaches of the code but not for others. And what that means, of course, is that if a franchisee or a franchisor breaks the law, it depends what are the laws you’ve broken as to whether or not you’re going to get penalised on it. So another recommendation has been you need to make those penalties applicable right across the code. That’s just common sense, so we’re not picking in the eyes of the law. But also ensuring that people have the opportunity first and foremost to sort it out, one to one, with them.
JOURNALIST:
And I guess with the 23 recommendations, what do you think would be the long term impacts of those?
COLLINS:
So what we want to do, of course, is to implement the recommendations. What we want to do longer term is look at the licensing model, which is why we’ve got Treasury standing up a task force to look at the licensing model. A licensing model would be a major reform of the sector, so what they want to do in the short term is to make the changes that Dr Schaper has suggested we do. And then long term, look at the licensing model. We will talk to the sector and do consultation about how quickly we may be able to do that. What we want to do is we want to make sure we consult before we make a decision on long term, on the licensing model.
JOURNALIST:
And that will happen straightaway?
COLLINS:
Yes, we’ll be starting it up straightaway.
JOURNALIST:
Is there a cost for implementing these changes at all?
COLLINS:
Treasury will, in terms of the cost, it will absorb the cost of doing the task force. Most of the changes we’re talking about are regulatory changes and updating the code. So there are no cost to those. But we will certainly work our way through the recommendations and implement them as quickly as we can, other than the recommendation around licensing, which we will investigate as quickly as we can.
JOURNALIST:
You just posted a picture of how many franchises there are around Australia. How many businesses will this affect that, I guess, and what they contribute to the economy as well?
COLLINS:
Well, the franchise sector is really significant here in Australia, as Dr Schaper has said. It’s actually been difficult to quantify, ironically, because of the size of the sector. One of the things that a licensing model would do, of course, would allow us to do that more broadly. What we do know is that there are millions of small businesses around the country that actually contribute very, very significantly to our economy, and what we know is franchising and franchisees are a very significant proportion of that.
JOURNALIST:
Would this also minimise the likelihood of workers being underpaid, because there have been issues there in the past.
COLLINS:
Well, of course, we will make sure that all workers get a fair pay for fair day’s work. That is what our reforms have been about in terms of our workplace relations changes that we have done. But what we have done since of course is do those in consultation with businesses and particularly with small businesses. What we’re trying to do here, as Dr Schaper said, is to deal with and to make it easier for dispute resolution and to make it easier for franchisees and franchisors so that they know the rules going in, and that they all adhere to the rules and when they can’t work things out, there’s a process to do so.