Better protection for franchisees

The franchise sector has welcomed the long-awaited Federal Government-commissioned report on the industry.

Small Business Minister Craig Emerson recently announced the most sweeping reform of the Franchising Code of Conduct since its inception 12 years ago.

"The reforms will put franchisees in a better position to understand the risks of going into franchising by giving them clearer information up front about the terms and conditions on offer", Dr Emerson said.

Franchise Council of Australia CEO Steve Wright said: "The FCA welcomes both the government decision and the recommendations by the expert panel, especially the decision against creating both new rules for good faith or unconscionable conduct in the franchising code of conduct.

"And we strongly endorse the government confirmation of its November 2009 announcement that it does not intend to adopt the onerous new franchising rules which were suggested in the 2008/09 joint parliamentary inquiry into franchising," he added.

Dr Emerson said the reforms will also better protect franchisees from "unconscionable conduct and false and misleading representations from unscrupulous franchisors while retaining for good, honest franchisors the flexibility they need to make franchising a commercial success for themselves and their franchisees."

Franchisors will be asked to provide prospective franchisees with a short, simple plain English document which sets out their rights and responsibilities, he said.

Dr Emerson, releasing the report of an expert panel set up to look at specific areas of concern in the franchising community, said it was vital that people considering buying a franchise had a complete understanding of the contract.

He said the Rudd Government had agreed with the expert panel's view that franchisors be asked to provide plain English guides, as well as its other recommendations in relation to unconscionable conduct, unilateral contract variations, unforeseen capital expenditure, attribution of legal costs, confidentiality agreements and the sale of the business.

Dr Emerson said the plain English guide would be additional to the current disclosure requirements under the Franchising Code and would emphasise the key costs, benefits and risks of the franchise system.

"The Government is seeking the support of the franchising community in voluntarily producing a short simple document," Dr Emerson said.

Dr Emerson said the Rudd Government was determined to protect franchisees and had already moved to give the Australian Competition and Consumer Commission (ACCC) the power to conduct random audits of franchisors.

Dr Emerson, speaking at a BRW conference in Sydney, said buying a franchise was an increasingly popular was of getting into business with 71,000 franchise agreements in place across the nation.

"Australian franchises employ more than 400,000 people and turn over around $130 billion a year - that's a lot of jobs and a lot of money," Dr Emerson said.