Review raises more questions: Government releases 176-question Franchising Code consultation paper

The review into the Franchising Code of Conduct has progressed to the next stage with the federal government issuing a complex consultation paper seeking responses to six times as many questions as appeared in the Code review’s original discussion paper.

The original discussion paper released in early January by Code reviewer Alan Wein included 29 questions across key topic areas such as disclosure, good faith, end of term arrangements, dispute resolution and enforcement.

The review received 73 submissions from a cross-section of franchisors, franchisees, business associations, academics, lawyers and other franchise sector participants, and resulted in 18 recommendations tabled in Wein’s final report, which was released on May 17.

However, the federal government’s official response to the Code review recommendations is to release a further consultation paper providing between two and five options on how to deal with each of the review’s18 recommendations, and then asks a further seven to 14 questions on implications and implementation issues for a preferred option.

Across all 18 Code review recommendations, the government consultation paper offers 62 options for consideration, and a total of 176 questions – six times more than the 29 questions originally released in the original Code review discussion document when the inquiry terms of reference were released in January.

A table of the number of options and questions in the consultation paper for each recommendation appears below.

To access the government’s Code review consultation paper which lists all 18 recommendations for changes to the Code, the government’s 62 options and 176 consultation questions, click here.

Responses to the consultation paper are due in approximately three weeks by Tuesday, July 9.

In a joint statement two days ago (June 16) to release the consultation paper, Federal Small Business Minister Gary Gray and Parliamentary Secretary for Small Business Bernie Ripoll announced that the consultation reflects the government’s commitment to providing certainty and confidence in the franchising sector.

“The consultation paper seeks to identify the regulatory impact to the franchise sector of implementing the review recommendations, but does not reflect a settled government position,” said the statement.

“While stakeholders have had the opportunity ti make submissions to the review, this second consultation will directly inform a detailed government response.”

Key recommendations among the 18 proposed by the Code review include:

• Strengthening the obligations of parties in a franchise to act in good faith;
• Financial penalties for breaches of the Code;
• Further improvements to prior disclosure; and
• Improved dispute resolution mechanisms.

For each Code review recommendation there are five common questions in the discussion paper, as well as further questions that specifically relate to the individual recommendation.

The five questions in common for each option and recommendation are:

1. Which of the proposed options best addresses the problem identified in the review?

2. What would be the costs and/or savings (such as, time, legal, accounting or administrative) to franchisors and franchisees of implementing that option?

3. If your preferred option is not the status quo, what will be the impact of retaining the status quo?

4. What are the benefits and/or disadvantages from implementing your preferred option?

5. Do you see any unintended consequences arising from the implementation of your preferred option?

The release of a further and highly-detailed consultation paper prior to the government deciding what recommendations it will accept or reject differs from the process followed after the last national inquiry into franchising in 2008, when the then Small Business Minister Craig Emerson responded directly to the inquiry recommendations without issuing an interim consultation paper.

However, it also took Emerson 11 months to respond to the inquiry recommendations, whereas the current inquiry has already evoked a ministerial response after just three weeks.

Queensland MP Bernie Ripoll who was appointed Parliamentary Secretary for Small Business in March this year, was previously the chairman of the joint parliamentary committee which conducted the 2008 review into the Franchising Code of Conduct.

A timeframe for the implementation of any recommendations that may be accepted by the government is unknown.

Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for 20 years at franchisee, franchisor and advisor level.