MP slammed over “rogue” warning to budding franchisees

Franchising experts have questioned the motives of WA Liberal MP Peter Abetz, who has warned prospective franchisees attending an industry expo might be exposed to “rogue elements” that may “prey” upon them.

The Perth Franchise Expo was held over the weekend, prompting Abetz to issue a warning to prospective franchisees as he described the sector as a “minefield”.

“There are people out there who prey on the inexperienced and naive business operator,” Abetz said in a statement.

“Franchising is not a level playing field and although I am sure the majority of exhibitors at the franchise expo are people of integrity, there is every likelihood that some rogue elements will be there as well.”

“While there is a Franchising Code of Conduct, franchisees need to be aware that there are no penalties for breaches of the code, which results in some franchisors thumbing their nose at the code.”

“I would caution anybody who is contemplating buying a franchise to take all precautions and seek independent advice before making a commitment.”

Late last year, Abetz introduced a private member’s bill in the WA State Parliament, calling for state-based legislation to protect WA franchisees from “rogue” franchisors.

The proposal has been met with criticism from the Franchise Council of Australia, which claims state-based legislation would duplicate national regulation and cripple the WA franchising industry.

The Franchising Bill 2010 is currently being examined by a Parliamentary Committee, which is expected to report back to Parliament by the end of June.

FCA chairman Stephen Giles says Abetz could be attempting to push his own agenda, questioning the validity of his argument.

“It says more about the fact that Mr Abetz’s attempts to introduce the laws are likely to prove unsuccessful as the weight of the argument and the logic of the argument dawns on people,” he says.

“We object to constant use of the term ‘rogue operators’ when there is no one being named and no evidence is being produced.”

“We don’t mind people pointing out that franchising is not a guaranteed ticket to success… But using the franchising expo was an inappropriate, ill-chosen, almost grandstanding opportunity – he’s damned every exhibitor.”

Jason Gehrke, director of the Franchise Advisory Centre, agrees Abetz could be “pushing his own wheelbarrow”.

“I think Mr Abetz’s warning is extraordinary given that he’s a member of the committee in WA which is conducting the inquiry into franchising,” Gehrke says.

“As a participant in the sector, I would find it very worrying indeed if Mr Abetz’s comments are in some way pre-emptive of the official findings of that inquiry.”

Gehrke says he doesn’t disagree with Abetz’s argument that any potential franchisee must undertake due diligence.

“That is recommended in all cases, but I find Mr Abetz’s comments in this regard to be out of order given the current inquiry,” he says.

“I would hate to think that he’s promoting his bill ahead of the due process of the inquiry. I would like to think not, but there is the possibility that Mr Abetz’s comments could be read outside the context of which they’ve been made and consequently lead people to an incorrect view of franchising.”

This article first appeared on StartupSmart, Australia’s top site for entrepreneurs starting a business.