Emerson finally moves on parliamentary report into franchising sector

Federal Small Business Minister Craig Emerson will launch a round of consultation with key franchising industry stakeholders, as he prepares to make a formal response to a controversial parliamentary inquiry into the franchising sector by a key parliamentary committee.

The Parliamentary Joint Committee on Corporation and Financial Services tabled its report into the franchising sector in early December 2008. It made 11 recommendations on ways to improve the operation of the sector, including:

• The introduction of a “good faith” clause in the franchising code.
• The Government explores avenues to better balance the rights and liabilities of franchisees and franchisors in the event of franchisor failure.
• Forcing franchisors to disclose to franchisees, before the franchise agreement is entered into, the process that will apply in determining the end of franchise arrangements.
• The amendment of the Trade Practices Act to include pecuniary penalties for breaches of the franchising code.

Franchising commentators have become increasingly frustrated with the lack of a response from Emerson on the report. In late May, South Australian Labor MP Tony Piccolo, who led an inquiry into the industry in his home state, wrote to Emerson urging him to act on the report.

In an announcement on Sunday, Emerson said he would hold a series of “targeted consultations” with members of the sector, before the release of an options paper in a few weeks. A final report is expected to be tabled in July.

Emerson has signaled a cautious approach to reform.

“In the reform process, we can do better than a ‘them-and-us’ approach,” he said in a statement.

“Genuine misunderstandings occur from time to time, sometimes relationships between franchisors and franchisees break down and sometimes people on both sides do the wrong thing. Yet most franchise arrangements work well and these good working relationships must not be jeopardised by the reforms.”

Piccolo is pleased to see action and has welcomed the relatively tight timeframe.

“I think it’s fair for the Minister to act cautiously as franchising is a growing industry and you don’t want to kill off the goose that lays that golden egg. But you do want to get the rogue ducks out of the pond.”

He says the reforms suggested by the parliamentary inquiry are designed to improve innovation, completion and disclosure within the sector.

“The reforms are about protecting the industry long-term.”

Piccolo said he would monitor closely the progress of the consultations and options paper and left the door open for state-based reform if the Commonwealth “failed to deliver”.