Why franchising certainty is suffering in WA

The final report of Western Australia’s franchise inquiry has recommended against the introduction of state laws for franchising.

The inquiry committee made nine recommendations in relation to a private member’s bill tabled by MP Peter Abetz last year to regulate the WA franchise.

Foremost among these recommendations was that the bill be opposed. However while this was the majority view, the inquiry committee’s deputy chairman recorded his disagreement with the view in a minority report appended to the findings of the inquiry. Bill proponent Abetz was co-opted to the inquiry committee, but in a non-voting role as an observer only.

The inquiry report reiterated that franchising is best regulated nationally, and that the 2010 changes to the Franchising Code of Conduct, along with changes to the enforcement powers of the Australian Competition and Consumer Commission, were material to its decision to oppose the WA bill.

Additionally, the report found that a proposed definition of good faith ¬– which was a major cornerstone of the bill – was unworkable and that good faith should be left undefined.

While it may be tempting to think the danger of state-based legislation in WA has passed, the reality is very different.

Abetz may still choose to pursue his bill, despite the inquiry’s recommendation against it, but to do so would risk isolating himself from his own party which is unlikely to overrule the inquiry’s primary recommendation that the bill should not be pursued.

If the bill is pursued regardless of the inquiry’s primary recommendation, then the remaining recommendations come into affect, which involve small but significant amendments to the proposed legislation.

None of the recommended amendments would result in the neutering of the bill, but they would result in further protestations about the duplication of existing national regulation, the risk of no double-jeopardy protection from concurrent state and federal prosecutions, the substantial compliance costs to franchisors (and to franchisees) and so on.

While the primary recommendation against the government adopting the bill appears to be a victory for common sense, the problem with common sense is that it ain’t that common. Vehement supporters of the bill with their own franchising axes to grind will continue their theatrical protestations and pollute informed debate with ambit claims and vested interests.

Those people who have genuinely had an unsuccessful business experience deserve sympathy and support, but unless governments can wave a magic wand to eliminate every risk involved in running a business, there will never be a guarantee of success in franchising or any other form of small business.

Nor should there be. Business involves assessing risk and investing accordingly. All business owners, including franchisees and franchisors, must maintain a watching brief on their operating environment and be constantly assessing risk factors to ensure their long-term survival.

So while the WA inquiry has recommended against the introduction of state-based legislation, there is no guarantee common sense will now leave this issue at rest and allow the national framework that already exists to function effectively.

And while the WA situation unfolds, the South Australian franchise inquiry is also likely to report its findings in the next few weeks, thus providing continued uncertainty for the franchise sector.

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

He advises both potential and existing franchisors and franchisees, and conducts franchise education programs throughout Australia, and publishes Franchise News & Events, a fortnightly email news bulletin on franchising issues and trends.