Transcript – Interview with Ross Greenwood, 2GB Money News, Sydney
Subjects: Franchising Code of Conduct, ACCC
Bruce Billson is the Small Business Minister responsible for all of this and of course as we have told you before Bruce is actually in Cabinet, which is one of the very first times that a Small Business Minister has been on the inner sanctum of our decision making in Australia.
Bruce, we appreciate your time.
Ross, great to speak to speak with you and your listeners.
Look, here’s the thing, the new Code of Conduct, I want to know, is it going to take every dispute out between franchisee and franchisor?
It is going to keep the relationship on track. We are confident it will make a really significant difference to what is a great business model.
Being in a franchise is a great way of getting into your own business. It is about being in your own business but not on your own, but that relationship that you touched on Ross, can be a little bit problematic.
It should be adult to adult, very much a shared purpose and a mutual interest in making it work but we have seen examples where when the relationship gets a little bit strained, that adult to adult rapport becomes parent-child and we have seen examples where the franchisee comes out the worse.
This is such a big area of our economy. 460,000 Australians have their jobs in the franchise systems. There is 80,000 business units, $144 billion turnover annually, we want to make sure the environment is right to see franchising continue to grow and to create job and livelihood opportunities for Australians.
Okay so the new code comes in from January 1 next year, so let’s say in the next month and a half. In that regard, what actually changes on that day?
Plenty changes; first of all, there is the statutory obligation to the franchisor and the franchisee to act in good faith in their dealings with each other.
There are now tools available and penalties, infringement fines and notices that can be instituted when one of the parties is doing the wrong thing.
There is better clarity around the way marking funds are applied.
There is a change to the way in which information is disclosed so that even when you are just thinking about maybe a franchise might be for you, being reminded that these at the end of the day are business, and businesses do not always succeed so be careful about the investment you are about to make. And now, be supported by a franchising code that has the tools and teeth to support innovation, to support enterprise and to manage what can be a difficult relationship when it sours.
What are the maximum penalties that can be levered against franchisors if they don’t act in good faith towards their franchisees?
Up to $51,000 is the penalty, but that would be a court ordered penalty. What we have changed Ross, is that the court process can take too long and the relationship can be irrevocably damaged by the delay in getting a grievance dealt with. So what we have changed, this is the first time in Australia that a Code of Conduct has infringement powers, where the ACCC can apply effectively a fine of up to $8,500 where there are breaches that need to be remedied, where decisive action is required and to get the parties to a franchising relationship back focusing on the business and their mutual success in a timely and responsive way.
Okay, so the other thing also is there’s got to be new documentation that has got to be issued out to franchisees by the franchisors, but that doesn’t come in immediately does it?
No, what we have tried to do is ease the transition.
Where a franchise system has already produced what is -quite frankly – extensive documentation that helps a franchisee make an informed decision, where they have already invested that money in doing so, those documents that are currently in place will have a shelf life through to the end of October next year.
But for any new document that is produced after the first of January, there will be more specific requirements on what information needs to be there – a continuous obligation of disclosure from the franchise system to the franchisees, where things are changing, and also a more timely production of updated information.
Again, streamlined Ross, so there is a savings in the compliance cost but a better outcome for those participants in the franchise system.
Well we can only hope so because as you’re aware, and we’ve spoken about it before, we’ve been critical here of the imbalance of power between franchisors and franchisees and in particular the self-regulatory body that was there, the industry body, we felt was too skewed in favour of the franchisors and in particular lawyers on that board were just overwhelming in some cases, so we really do trust that this does have a fighting chance of trying to even out that playing field because it certainly is an important part of business for Australia.
Bruce Billson is the Small Business Minister and it’s a good initiative and Bruce we appreciate your time on the program.
Great to speak with you Ross and thanks for your support for energising enterprise of Australia.