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Government to review $170bn franchising sector

Regulation

Enforcement of the Franchising Code of Conduct, transparency and franchiser dispute resolution to come under scrutiny.

By Christine Chen 10 minute read

The government has launched a review into the $170 billion franchise sector to see how recent changes to the Franchising Code of Conduct have affected fairness and competition in the industry.

Minister for Small Business Julie Collins said the review would determine whether the framework promotes positive commercial relationships between franchisors and franchisees.

“The review is an opportunity to evaluate the effectiveness of the current regulations,” she said.

Small business and regulator expert Dr Michael Schaper would lead the investigation to examine the impact of recent changes to the legislative framework, the announcement said.

Dr Schaper, a former ACCC deputy chairman, chairs Western Australia’s Gaming and Wagering Commission and has acted as an independent lead reviewer for various state inquiries.

“The government is very pleased to have Dr Schaper leading this important work,” Ms Collins said.

The Franchising Code of Conduct has been part of the sector’s regulatory landscape since 1998 and has seen several amendments since its introduction.

The government’s review into the code comes after a suite of reforms were introduced in recent years, following recommendations from a joint committee and government report on fairness in franchising in 2020.

The review’s terms of reference state that a statutory review of car dealer protections, introduced in 2021, will be undertaken. 

Protections available to automotive franchisees will be examined to decide whether they should be extended beyond new car dealerships to include other businesses like truck, motorcycle and farm machinery dealerships. 

The review will also evaluate the changes to the code made in 2022, namely the Franchise Disclosure Register and the amended franchisor penalty regime, which increased maximum penalties available for breaches of the code.

In addition, the review will evaluate dispute resolution and enforcement of the code by the ACCC and Australian small business and family enterprise ombudsman.

The terms of reference also noted that the code will terminate on April 1, 2025.

Stakeholders, including small businesses and franchisors, will have a chance to make submissions in coming days.

Chair of the small business body COSBOA Matthew Addison welcomed the review as a way to ensure small business owners would be treated fairly by franchisors.

“Small business needs support at the moment, we need streamlined systems and encouragement to be in business and to be productive,” he said.

“We hope that the review would ensure that the code and the regulation remains contemporary, making it easier for small businesses to be productive.”

The Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, also supported the review.

“Franchised business models enable a very significant contribution to the Australian economy, and franchising, when done well, can be a terrific mode of entrepreneurship,” Mr Billson said.

“The regulatory framework plays a vital role in supporting the informed commercial decision-making and the positive, mutually supportive relationships at the heart of successful franchising. And this review will help to ensure the framework is fit-for-purpose at this time of change and dynamism in the small business economy.”

 

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Christine Chen

Christine Chen

AUTHOR

Christine Chen is a graduate journalist at Accountants Daily and Accounting Times, the leading sources of news, insight, and educational content for professionals in the accounting sector.

Previously, Christine has written for City Hub, the South Sydney Herald and Honi Soit. She has also produced online content for LegalVision and completed internships at EY and Deloitte.

Christine has a commerce degree from the University of Western Australia and is studying a Juris Doctor degree at the University of Sydney. 

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