Franchisor threatens to move headquarters in protests over WA franchising laws, survey examines franchise disputes

Western Australian franchise giant Quick Service Restaurant Holdings has threatened to move its corporate headquarters and 3,800 jobs to the eastern seaboard if Western Australia’s controversial state-based franchise law proposal is approved by the state’s Parliament.

QSR, which owns the Red Rooster, O’Porto and Chicken Treat brands, and recently acquired the Chooks Fresh & Tasty chain, has 600 stores around Australia, with a strong presence in Western Australia.

Chief executive Mark Lindsay said in a statement that the extra compliance burden created by state-based franchising laws would put the group at a disadvantage to eastern state competitors.

“We are concerned that the good faith aspects of the Bill will result in potential litigation (by franchisees),” Lindsay told the West Australian.

“There is no provision for mediation in the current draft of the legislation.”

West Australian Liberal MP Peter Abetz recently introduced the draft bill, which is modelled on similar legislation proposed in South Australia. Both bills would impose a duty act in good faith on franchisors and franchisees and would impose penalties of up to $110,000 for breaches of the law.

Franchise Council executive director Steve Wright, who is bitterly opposed to both state-based proposals, says Lindsay’s stance is one shared by many in the WA franchise sector.

“QSR is not on its own. Other WA-based businesses are expressing the same concerns,” Wright says.

“WA represents a $10 billion franchise sector. If this bill lands in WA, expect to see millions of dollars of future investment in small business heading off in other directions.”

Yesterday, with the bill set to be debated in WA Parliament, the Franchise Council sent all WA MPs a document outlining their opposition to the proposed bill, and copies of petitions against the draft law.

“The industry response to this Bill may come as a surprise to some WA MPs who appear to have been lead up the garden path about the supposedly benign nature of the Bill. Hopefully now they will pay closer attention to what is driving this private members’ bill and what its outcomes will be. When they do, it is hard to see how they could continue to support it.”

In other franchise news, a new survey of 81 franchisors by research firm 10 Thousand Feet has revealed that almost 60% have been involved in a contractual dispute with a franchisee in the past three years.

The survey showed 58% of franchisors had been in a formal dispute with a franchisee in the past three years – which was defined as a written complaint – with 34% of these disputes going to mediation and 17% had disputes that were required to go to court.

Ian Krawitz, head of intelligence at 10 Thousand Feet, says the stats suggest that the bulk of disputes are settled very quickly, but argues relatively high level of disputes should not be taken as a sign that there are big problems in the sector.

“The nature of the franchisor/franchisee relationship means you are more likely to get a high level of disputes, because of the dependency between the parties.”

The survey also looked to the level of franchisor compliance with changes to the Franchising Code which came into force from July 1, including new requirements to inform franchisees that they could be required to invest capital during their franchise agreement, informing them of restrictions on selling their franchise and informing them of the potential for unilateral changes to a franchise agreement.

10 Thousand Feet found more than 75% of franchisors were already complying with the new requirements.

“For the most part, franchisors are right on top of these changes, there is just a few guys who are not doing the right thing.”