The government has released its response to the Fairness in Franchising report, which identified significant weakness in parts of the franchising sector.
Michaelia Cash, Minister for Employment, Skills, Small and Family Business, and Michael Sukkar, Minister for Housing and Assistant Treasurer, have announced new measures that aim to ensure fairness and accountability for both franchisees and franchisors.
These reforms will be achieved through changes including:
- Doubling the penalties that apply for breaches of the Franchising Code.
- Strengthening dispute resolution options by introducing conciliation and voluntary binding arbitration.
- Improving disclosure relating to supply arrangements, marketing funds, exit arrangements and significant capital. expenditure
- Introducing a public register of franchisors to increase transparency in the sector.
- Developing a franchising website to make it easier for both franchisors and franchisees to access information and support.
- Prohibiting franchisors unilaterally imposing significant capital expenditure on franchisees during the term of an agreement.
Minister Cash said the government will strengthen the regulatory framework and restore confidence in the sector.
“We are working to deliver reforms that are fair, effective and accountable in the interests of both franchisors and franchisees, while avoiding unnecessary red tape.
The government will work closely with franchisors and franchisees to design and implement the reforms.
The response has been welcomed by the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell.
“The report focuses on the three key parts of the lifecycle of a franchisee – entry, running the business, and exiting the business,’ said Carnell.
“My office already deals with a broad range of complaints, centred around these aspects of owning a franchise. We know that the power imbalance between franchisor and franchisee makes negotiating disputes incredibly difficult.”
The response incorporates the functions of the Franchising Mediation Adviser into the Ombudsman’s office.
“This is a welcome change that we and others have been advocating for over some time now that will help us more effectively resolve disputes.”
The review points to further consultation on a number of important aspects in franchising practices and disputes.
“I remain concerned that the response’s commitment to ongoing consultation will further delay the changes that everyone in the sector know are sorely needed.
“I appreciate that this can be a complex area, but it has now taken a full 18 months for the Government to respond to the Parliamentary Joint Committee report.
“Further consultation and delay in effecting change is unacceptable and will continue to heap pressure on small businesses during these extremely difficult times.
“We will continue to advocate for timely and effective changes to assist small businesses, and look forward to working with the Government to deliver these crucial reforms.”
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