The government is set to undertake a review of the Franchising Code of Conduct and its impact on fairness and competition in the sector. The regulatory framework has been amended a number of times since its introduction in 1998, including more recent changes made following recommendations from a joint committee on fairness in the industry in 2020.
Dr Michael Schaper, a small business and regulator expert and chairman of Western Australia’s Gaming and Wagering Commission, has been chosen to lead the inquiry. He has acted as an independent lead reviewer several times for different state inquiries.
Australia is home to one of the highest levels of franchising outlets per capita in the world, with a presence in almost all business categories. According to the Franchise Council of Australia, there are more than 1,200 franchisors and 94,000 franchise outlets across the country. This $174 billion sector is estimated to employ 565,000 people.
Amongst the issues to be reviewed are new car dealer protections that were introduced in 2021. The review will determine if the protections are proving effective and should be expanded to include other motor vehicle-type dealerships such as motorcycles, trucks, and farm machinery. The Franchise Disclosure Register and increases made to some penalties for breaches of the Franchise Code are also to be evaluated.
This announcement has been positively received by stakeholders including the chairman of COSBOA, Mathew Addison. He said that this process would ensure small business owners were being fairly treated by franchisors and would demonstrate support for the sector. Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, is also in support of the review, stating that the franchise business was a significant contributor to the national economy and when done well was an excellent path to entrepreneurship.
University of Sydney’s Professor of Business Regulation, Andrew Terry, has however said that underneath the seemingly simplicity of the franchise business model, there were complex business relationships at play. He pointed out the power and knowledge imbalance between the franchisor and franchisee that could lead to tensions in the relationship.
Billson is hopeful that with the review, the fitness of the regulatory framework of the sector will assured at a time of change and dynamism in the small business economy. He also said that the review will ascertain if the outcomes and consequences of amendments made were what was intended.
The review comes at an opportune time as one of the world’s biggest food franchisors, Wendy’s confirms that it will be entering the market. The burger giant intends to open 200 restaurants in Australia from 2025 to 2034, under an exclusive master franchise agreement with the Flynn Restaurant Group.
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