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ARA: inquiry confirms strong, healthy franchise sector

Peak retail industry body the Australian Retailers Association (ARA) has welcomed the Joint Committee on Corporations and Financial Services’ report on the inquiry into the Franchising Code of Conduct tabled in parliament yesterday.

ARA Executive Director (former CEO of the Franchise Council of Australia) Richard Evans said the parliamentary report was the third one for the year confirming the franchise sector is strong, healthy and provides an opportunity for retailers to expand their brand. 

"Firstly, I congratulate the Committee for the rigorous way they approached the Inquiry, seeking balance through the many sources of informed experts within the sector. 

"With 52 percent of all franchising systems sitting in the retail market, franchising provides a major opportunity for Australian small business retailers to enter and expand in the market. The result of this Inquiry, as well as SA and WA inquiries earlier this year, only validates the strength of Australia's franchising sector. 

"The Committee's eleven recommendations confirm the sector has no major systemic issues but provide clarity and enforcement to franchisee / franchisor rights and obligations under the existing Code. 

"In particular, the ARA welcomes the recommendation that the Franchising Code of Conduct be amended to require franchisors to clearly disclose the processes that will apply in determining end of term agreements to franchisees. 

"We also support the idea to provide weight to the Franchising Code of Conduct by introducing penalties and sanctions for breaches. However, we question whether this will be extended to other breaches of the Trade Practices Act (TPA).  The recommendations provide little definition for acting in good faith other than what is already available in section 51AC of the TPA. 

"Businesses fail - that is true - but it's not the Franchising Code of Conduct that lets them down. Pre-entry education for franchisees; ensuring franchisee due diligence and certifying consultants who provide advice to sector would go a long way to mitigate franchisee failure. However, the Committee's report provides little advice on these issues. 

"The franchise sector is a strong sector and the Committee's report on the Inquiry into the Franchising Code of Conduct only validates that proposition," Evans said.

For over 104 years, the Australian Retailers Association (ARA) has been the peak industry body in Australia's $292 billion retail sector which employs over 1.2 million people. As an incorporated employer body under the Workplace Relations Act and with a range of member services including business consulting, policy development, advocacy and education, the ARA promotes and protects over 5000 independent and national retailers throughout Australia. Visit www.retail.org.au or call 1300 368 041.

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