COM­PLI­ANCE IS KEY

Inside Franchise Business - - Contents - MARY AL­DRED CEO, Fran­chise Coun­cil of Aus­tralia

FCA CEO Mary Al­dred stresses the im­por­tance of com­pli­ance.

Ex­am­ples of poor fran­chis­ing ex­pe­ri­ences would most cer­tainly be re­duced by greater com­pli­ance and en­force­ment across the sec­tor, the Fran­chise Coun­cil of Aus­tralia (FCA) be­lieves.

With fran­chis­ing hav­ing re­ceived sub­stan­tial me­dia scru­tiny, it is now the sub­ject of a fed­eral par­lia­men­tary in­quiry tasked with re­view­ing the ef­fec­tive­ness of the Fran­chis­ing Code of Con­duct, which gov­erns the sec­tor.Fran­chis­ing di­rectly em­ploys nearly half a mil­lion Aus­tralians, with al­most 80,000 fran­chise units trad­ing across the na­tion. There are sim­ply too many liveli­hoods at stake for the in­quiry to de­liver find­ings that would ad­versely im­pact this un­par­al­leled model of en­trepreneur­ship.

That is why, in its sub­mis­sion to the in­quiry, the FCA

The Fran­chise Coun­cil of Aus­tralia does not see the need for ex­tra reg­u­la­tions, just the abil­ity to en­force what is al­ready in place.

ad­vo­cated en­forc­ing com­pli­ance with the ex­ist­ing struc­ture rather than adding ex­tra reg­u­la­tions. It be­lieves there should be a stronger cul­ture of com­pli­ance across the sec­tor, and that this should be the fo­cus of the in­quiry.

No-one is more keen than the FCA to un­der­stand the un­der­ly­ing causes of poor fran­chis­ing ex­pe­ri­ences be­ing re­ported. Con­versely, the FCA is also priv­i­leged to hear about the many, many pos­i­tive ex­pe­ri­ences fran­chis­ing pro­vides.

SUC­CESS STO­RIES

There are sto­ries of fam­i­lies who have built in­ter­gen­er­a­tional fran­chise busi­nesses, of mi­grants who have taken the sys­tems and pro­cesses of­fered through fran­chis­ing and grown suc­cess­ful multi-unit busi­nesses, small-busi­ness peo­ple who have bought a strug­gling fran­chise busi­ness and through hard work and ded­i­ca­tion turned it into one of the network’s best per­form­ers.

It is women who have found the flex­i­bil­ity to bal­ance fam­i­lies and busi­ness own­er­ship, em­ploy­ees of a fran­chise busi­ness who have gone on to be­come prof­itable fran­chisees in their own right and in­di­vid­u­als who have carved out suc­cess­ful ca­reers as fran­chisees within more than one fran­chise brand.

These sto­ries and so many more ex­em­plify the power of fran­chis­ing to pos­i­tively trans­form lives and liveli­hoods.

It is im­por­tant these sto­ries be told, and that any rec­om­men­da­tions made as a re­sult of this fran­chis­ing in­quiry do not cre­ate a reg­u­la­tory land­scape that im­pedes the abil­ity of fu­ture fran­chisees to re­alise their busi­ness goals.

Aus­tralia’s sub­stan­tial and suc­cess­ful fran­chised econ­omy is al­ready sup­ported by one of the most com­pre­hen­sive and ef­fec­tive fran­chis­ing reg­u­la­tory sys­tems in the world. In our ex­pe­ri­ence, most fran­chise busi­nesses by far up­hold the high­est stan­dards. And while fran­chised busi­nesses en­joy im­proved prospects of suc­cess and prof­itabil­ity com­pared to in­de­pen­dent, stand­alone busi­nesses, they still com­pete in a dy­namic and chal­leng­ing mar­ket­place.

AP­PAR­ENT BREACHES

The FCA ac­knowl­edges there are ex­am­ples of poor com­mer­cial out­comes within fran­chis­ing that ap­pear to have risen not only from mar­ket pres­sures, but also from in­ci­dences of poor prac­tice and stan­dards, as well as ap­par­ent breaches of the Code of Con­duct.

The is­sue is not that the reg­u­la­tory frame­work fails to pre­scribe pro­tec­tive mea­sures. Rather, it is that in cer­tain re­ported cases the code has sim­ply not been ad­hered to, nor has it al­ways been en­forced. This means that reg­u­la­tors such as the Aus­tralian Com­pe­ti­tion and Con­sumer Com­mis­sion (ACCC), which ad­min­is­ters the Fran­chis­ing Code of Con­duct, need to be ad­e­quately re­sourced to col­lect data, pro­vide guid­ance on best prac­tice, in­ves­ti­gate claims of wrong­do­ing and, where nec­es­sary, take en­force­ment ac­tion. That needs to be a key fo­cus of this in­quiry.

That is why the FCA’s sub­mis­sion rec­om­mends mak­ing more fund­ing avail­able to the ACCC and al­lied agen­cies to bet­ter sup­port en­force­ment of the code and more ef­fi­ciently re­spond to small-busi­ness con­cerns about any al­leged lack of com­pli­ance. The ACCC needs to be able to use its pow­ers to is­sue fines and in­fringe­ment no­tices, con­duct ran­dom au­dits and take court ac­tions more fre­quently where there is sys­temic ev­i­dence of non-com­pli­ance.

A fran­chisor’s first cus­tomer is its fran­chisees. Pub­li­cised ex­am­ples show what can hap­pen if other im­per­a­tives or pri­or­i­ties creep into the fran­chise re­la­tion­ship. Pro­vid­ing each and every prospec­tive fran­chisee with the best chance of run­ning a suc­cess­ful busi­ness, while ac­knowl­edg­ing the im­pact of ex­ter­nal mar­ket forces, should be the goal of every fran­chisor.

REC­OM­MEN­DA­TIONS

How­ever, more can be done to en­sure fran­chisees have all the per­ti­nent in­for­ma­tion they need be­fore sign­ing a fran­chise agree­ment. The FCA’s in­quiry sub­mis­sion makes rec­om­men­da­tions for en­sur­ing more fran­chisees use and fol­low the code process by:

• Al­lo­cat­ing fund­ing to ed­u­ca­tional ini­tia­tives that en­sure prospec­tive fran­chisees are aware of the pro­tec­tions avail­able to them, the ben­e­fits of ob­tain­ing ad­vice, their due-dili­gence obli­ga­tions and avail­able guid­ance re­sources;

• Stream­lin­ing the code’s dis­clo­sure doc­u­men­ta­tion, pro­vid­ing more fo­cused in­for­ma­tion about the risks and op­por­tu­ni­ties, re­wards and obli­ga­tions of a prospec­tive fran­chise busi­ness in­vest­ment in a for­mat that is eas­ier for fran­chisees and their ad­vi­sors to use; and

• Trans­lat­ing the code’s In­for­ma­tion State­ment into mul­ti­ple lan­guages be­cause about 70 per cent of small-busi­ness owners are mi­grants. Man­dat­ing the re­quire­ment for some prospec­tive fran­chisees to ob­tain com­pe­tent le­gal and busi­ness ad­vice be­fore mak­ing the sig­nif­i­cant per­sonal and com­mer­cial de­ci­sion to in­vest in a fran­chise busi­ness op­por­tu­nity is another of the FCA’s core rec­om­men­da­tions.

RE­SPECT AND PRO­TECT

A strong com­pli­ance and en­force­ment set­ting is in­cred­i­bly im­por­tant to re­spect and pro­tect this busi­ness model and the thou­sands of hard-work­ing peo­ple who de­pend on it.

How­ever, it is equally im­por­tant that any reg­u­la­tory changes strike the right bal­ance be­tween a “rules-based sys­tem” and the rights of in­di­vid­ual busi­nesses to work freely in a mar­ket that cre­ates jobs, con­sumer choice and share­holder wealth through com­pe­ti­tion, in­no­va­tion and en­trepreneur­ship.

A fail­ure to do this, or overly heavy­handed and un­nec­es­sary reg­u­la­tion, will jeop­ar­dise jobs, risk thou­sands of small busi­nesses and also hurt con­sumers.

As the peak body for fran­chis­ing in Aus­tralia, the FCA will con­tinue to work with the gov­ern­ment, reg­u­la­tors, fran­chisees and fran­chisors, sup­pli­ers and em­ploy­ees to en­sure high stan­dards are ob­served and the sec­tor is seen as an em­ployer of choice.

Fran­chis­ing is truly the en­gine room of the Aus­tralian econ­omy, with the $146 bil­lion sec­tor be­ing re­spon­si­ble for nearly half a mil­lion jobs across the na­tion.

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