Federal Government’s franchising report delayed

The Federal Government’s formal response to a Parliamentary inquiry into the Franchising Code has been delayed.

Small Business Minister Craig Emerson had previously said he hoped to release the response in late July, but a spokesman for the Minister says it will be released in the “near future”.

“It’s a complex Code and there’s a lot to consider. We’ve been busy going through all the submissions we received.”

Emerson’s report will form the Government’s formal response to the Joint Standing Committee on Corporations and Financial Services inquiry into the sector, which was chaired by Labor MP Bernie Ripoll and handed down its bipartisan report in December 2008.

The Committee made 11 recommendations, including changes to the Franchising Code, improvements to dispute resolution processes and better disclosure by franchisors.

The most controversial recommendation was the insertion of a “good faith” clause in the Code, which would require franchisors and franchisees to act in a fair and reasonable way at all times.

Franchisee advocates support the idea of good faith and argue it would improve relationships between franchisees and franchisors, and particularly would stop instances where a franchisee is unfairly terminated.

But the Franchise Council of Australia is against the move, claiming proponents want to use the clause to force franchisors to automatically negotiate the renewal of a franchise agreement or at least pay a franchisee whose agreement has expired an entitlement for goodwill.

The argument is academic – most franchise sector commentators agree there is almost no way a good faith clause will win Emerson’s support.

Other changes more likely to get up include improvements to disclosure around what happens at the end of a franchise agreement and what happens in the event of franchisor failure and improved mediation processes.

It is also possible the Government will support a recommendation to establish a national register of franchises, which will also help regulators gather data on the sector.