Call for probe into franchise system
THE Franchise Council of Australia has asked the Australian Small Business and Family Enterprise Ombudsman to look at the sector amid ongoing concerns about failed franchises.
The move comes amid a clamour for a parliamentary inquiry following scandals over the mistreatment of franchisees by chains including 7E leven , Domino’s Pizza Enterprises, Pizza Hut and the Retail Food Group.
But council chairman Bruce Billson strongly defended the sector, saying it was not “broken” or “defective”. Mr Billson said he requested Ombudsman Kate Carnell look at aspects of the Franchising Code of Conduct covering fair dealings and dispute resolution.
He said the code had exten- sive safeguards. But he questioned whether people were doing enough research before investing, swept up in the excitement of running their own businesses.
“My benchmark is for every dollar you are going to spend on a franchise, spend an hour on due diligence,” he said.
Mr Billson said the inquiry, if the Ombudsman approved, would “seek to identify any gaps or deficiencies in this ex- tensive regulatory framework with the view to recommending any necessary regulatory change, adjustment to agency operations, public education and awareness campaigns or industry-led initiatives, having considered a thorough assessment of the likely impacts”.
The inquiry, he said, would ensure the current “franchisor v franchise” narrative was replaced by “clear-headed and considered insights”.
He said that while there had been some less-than-positive experiences for some aspiring small business entrepreneurs, the sector was successful.
“It’s also damaging to the vast majority ... who have positive experiences with franchising and who are now concerned about impacts on asset values, resale prospects and reputational harm.”
The franchisee model drove $1 in every $11 of gross domestic product in Australia, Mr Billson said, which “supported by a comprehensive regulatory framework, enables 1100 franchise brands to support 80,000 customer-facing franchise businesses employing 460,000 Australians”.