Can Rudd’s return as PM provide certainty for franchising?

Kevin Rudd’s comeback as Prime Minister could provide certainty for the franchise sector if he can defer an election long enough for parliament to consider changes to the Franchising Code of Conduct and related legislation.

The September 14 election date announced by previous Prime Minister Julia Gillard clashed with the current review of the Franchising Code of Conduct.

Although the review itself was announced in January, closed for submissions in February, and resulted in an extensive report featuring 18 recommendations from reviewer Alan Wein to the federal government in May, the government was unable to consider legislation before parliament rose for its annual mid-year break in late June.

The next step in the process was the government’s release on June 16 of a discussion paper to seek feedback from the franchise sector and others about various options available to the government to respond to the 18 recommendations from the Wein report.

Across all 18 code review recommendations, the discussion paper offered 62 options for consideration, and a total of 176 questions seeking information in support of each respondent’s preferred options.

Most recommendations featured three options: accept the recommendation; do not accept the recommendation (ie. do nothing); or accept only part of the recommendation.

Public submissions to the government’s discussion paper closed on July 9, and received greater than 160 responses – more than double the original number of submissions to the code review inquiry earlier this year.

From here, the government will now develop its response to the recommendations to the review. The response could lead to legislation that may be considered in the next round of parliament if Kevin Rudd opts for an election date later than September 14 (indeed some political commentators have suggested an election as late as the end of November).

Fortunately for the franchise sector, both of the key members of parliament involved in the code review – Small Business Minister Gary Gray and Parliamentary Secretary for Small Business Bernie Ripoll – continued in their roles after Rudd’s elevation to Prime Minister and the cabinet reshuffle which followed.

Gray was appointed Small Business Minister in March this year, becoming the fifth minister to hold the portfolio in just 15 months following a string of previous ministers including Chris Bowen, Brendan O’Connor, Mark Arbib and Nick Sherry, and is the sixth Small Business Minister since the last review of the Franchising Code of Conduct under then minister Craig Emerson in 2008.

Bernie Ripoll was also appointed to his current role in March this year but, unlike Gray, has significant prior experience dealing with reform of the franchise sector through his previous role as chairman of the joint parliamentary committee which conducted the 2008 review of the Franchising Code of Conduct.

In 2008, Ripoll’s inquiry made 11 recommendations for change to the Franchising Code. After deliberating for almost a year, the then Small Business Minister Craig Emerson decided that only eight recommendations would be adopted in part or in full, and these changes were introduced to the code on July 1, 2010.

For Ripoll, the current review of the code represents the opportunity to complete the job he started in 2008.

All of the government’s media statements about the code review since the appointment of Gray and Ripoll to their respective portfolios in March have been joint statements from Gray as Small Business Minister, and Ripoll as Parliamentary Secretary.

Joint statements by ministers and their parliamentary secretaries are very rare, so it is logical to assume that Ripoll has the greater understanding of the issues given his previous involvement with the sector, and therefore also has the greatest capacity to shape the government’s response to the review’s recommendations.

If Kevin Rudd opts to hold an election later than the September 14 date proposed by his predecessor, then parliament will resume on August 20 (rather than go into caretaker mode for an election), and potentially have the opportunity to consider and approve any draft legislation to amend the Franchising Code of Conduct.

If this occurs (and subject to the nature of any changes themselves) then certainty about the legislative landscape will return to the franchise sector.

However if an election is held before the code can be changed by the current government, the sector could well face further uncertainty until a future government revisits the findings of the current code review inquiry, or decides to conduct another of its own.

Should the next government choose to conduct a whole new inquiry, then it will be Groundhog Day all over again, and further uncertainty for the franchise sector.

Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for 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.