Franchise
frenzy ...
by Christian Dige
Annually the
piggy-back process produces 4,000 new businesses, 40,000 jobs
and heaps of hassle and hardship. Christian Dige examines
efforts to establish a serious regulatory regime.
Ever
since the Franchise Code Council (FCC) folded in 1996 there's
been a regulatory void on the franchising front. But it now
seems that hole is about to be plugged.
Intro
The
correction comes on two fronts. There's the industry run Franchise
Council of Australia (FCA) which has been around since 1983, but
has just recently started to crank up its profile. And there's
the Federal Government's latest initiative, the Franchise Policy
Council (FPC) which was announced on March 3.
The former works like any other trade organisation; the latter
will, in conjunction with the Australian Consumer and Competition
Commission (ACCC), enforce a mandatory set of guidelines designed
to govern the industry. These rules are set to be announced on
1 July this year.
Since nothing firm has been offered for consideration, the FCA's
deputy chairman, David Acheson, is anxiously watching his calender.
"It certainly doesn't leave much time," he laments. "With a review
process and various groups wanting to comment, they are really
going to have to move. "Quite frankly, I think the timing is a
little ambitious."
Whether or not we see a concrete code before winter, at least
the Federal Government is doing something. When you think of how
big franchising has become and the enormous growth that's predicted,
it's about time someone got serious about regulating this billion-dollar
sector of the economy. (In the past two years the industry has
grown from $40 billion to $60 billion).
With more 40- and 50-somethings being retrenched than ever before,
there's a glut of able people looking to sink their savings into
an enterprise. Not nearly ready to retire, they see franchising
as the perfect opportunity. For many it is, yet for an unfortunate
group, all they achieve is further hardship. While the Government's
FPC will be legally enforceable "It's only when someone actually
makes a complaint that action is taken," says Acheson. "The FCA
likes to take a more proactive step."
Like the
Australian Made triangle which is still in bureaucratic limbo
this means that franchisors will have to pass a set of guidelines
(the code) before being awarded use of the FCA's logo. With the
proper marketing this has the potential to become a powerful safeguard.
"We
want all franchisors to use the logo on every piece of stationary
they use," says Bill McGowan, who has spearheaded explosive growth
at Fastway Couriers. He is now a keen advocate of the FCA. "Our
sister council in New Zealand has marketed themselves so well
that any franchisor who doesn't display their logo is immediately
considered second class," he says. "This is the kind of recognition
we must achieve here."
An admirable sentiment, but one which still requires much work.
The FCA has already done some good things, though. Apart from
pressuring the Government into action, it has a dispute resolution
service which FCA general manager Jim McCracken says "hasn't failed
once". The 12-member board is elected by its members and represents
a broad cross-section of the industry. It has also just released
a comprehensive manual for would-be franchisees titled The Franchisee's
Guide. This 94-page book costs a mere $15.
The FCA's goal must now be to project an image of toughness and
spirited diligence. When you talk about franchising, there is
a tendency for talk to turn quickly to the Cut Price Deli's of
this world. For that discussion to focus on the many and varied
franchising success stories the FCA must adopt a no-tolerance
approach: simply acting as an industry group won't get them the
credibility it yearns for. They must have a tough code and a sense
of fearlessness when it comes to exposing dodgy operators.
For more
information on the FCA, call the head office in Melbourne (03)
9650 1667 or visit www.fca.com.au
(box) According to the Bureau of Statistics, franchising in Australia
produces 4,000 new businesses and 40,000 jobs a year. The industry
is forecast to account for 60 per cent of Australia's GDP by the
late 21st century, against 3 per cent now Source: Phil Ruthven,
IBS Business Information
(box) The Federal Government's Franchising Policy Council will:
- Undertake
a public review of the Franchising Code of Practice which
includes a) analysing submissions received on the draft Code,
and b) developing a code for the consideration of the Federal
Minster for Small
- Business
- Work with
industry and government to obtain agreement on the code
- Seek input
and feedback about the code's operation;
- Monitor
the operation of the code in consultation with industry and
the ACCC; and - Report annually to the Minister.
Key Code Points
Main
points of the FCA's Code:
- Mandatory
disclosure and information document
- Compulsory
disclosure of tenancy lease conditions
- Mandatory
seven-day cooling off period for franchisees
- Advice for
intending franchises from independent solicitors and accountants
- Compulsory
code of behaviour
- Compulsory
mediation to resolve any disputes between franchisees and
franchisors
- Member complaint
procedures
- Solicitor's
certificate that franchisor's agreement and disclosure document
conform to requirements
- Franchisor's
warranty of solvency, character, trademarks and ongoing franchisor's
rights
