As a veteran businessman who has led a Western Australia-based franchise business for almost two decades, I’d like to see further growth in the sector and more opportunities for franchisees and franchisors, which is why it’s time for the Federal Government to commit to cutting red tape around the Franchise Code of Conduct.
Recent changes have seen the creation of ‘super penalties’ for breaches of select provisions and the creation of a publicly available Franchise Disclosure Register.
While I believe the intention is worthy – better protecting franchisees – I question whether they’ll actually deliver that result.
The Code is cumbersome and doesn’t make life easier for either new franchisors or franchisees.
At a time when we want to be supporting local businesses and encouraging more people to become involved in retail, we should be making processes easier, not harder.
I wholeheartedly support moves to ensure franchisees feel better protected because it’s in the best interests of the overall business if both franchisee and franchisor have a strong relationship.
However, I would argue that new reporting requirements around the Disclosure Register and for prospective franchisees actually allow franchisors less time to work on business development and support franchisees overall.
Where we can, I believe we should cut red tape to ensure people aren’t discouraged from entering the franchising sector, and ensure the Code is more efficient.
There are two key steps that can be taken;
- Expedite the Process: Franchisees should be able to waive their right to the 14-day period from receiving the Disclosure Document until signing the franchise agreement and also waive the 14-day cooling-off period if they are represented by a solicitor who confirms this. This will allow both the franchisor and franchisee to progress agreements faster than they are currently able to.
- Simplify Disclosure Documents: Long-established franchise networks with several stores should be able to use a more simplified disclosure document than those franchise networks that are more recently established. Prospective franchisees have more avenues for due diligence via both existing and former franchisees within more established networks, meaning they have to rely less on the disclosure document than is the case for newer ones.
I would also question the Code’s reliance on ‘good faith’ – which is too open to interpretation.
Good faith isn’t given an exact definition within the Code, beyond needing to reflect common law.
The idea is that both sides need to have due regard to the rights and interests of the other party, but I would argue that’s highly subjective and doesn’t provide clear guidance or boundaries.
It’s time for improvements to be made to the Code, not only for the benefit of franchisees and franchisors but to encourage growth of the sector overall.
