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State support for franchising

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State support for franchising

The state government, through Small Business Victoria, is helping Tatts by co-funding mentoring for Tatts franchisees. There is no political agenda and no vote-grabbing angle. It’s simply about promoting small business; making small business entrepreneurs better business people by giving them guidance from people who have been through it all before.

What a great initiative. And a pure initiative, with no profiteering middlemen sucking out resources. It’s part of a refreshing can-do, action-oriented attitude evident in Small Business Victoria.

Another proactive angle is the Mobile Business Centre — a small business advice van which is touring city and country areas. To find out if it is coming near you any time soon, go to www.business.vic.gov.au

Model behaviour

In my opinion, this van ought to be permanently touring the entire country — now that would be a good example of state governments working together, wouldn’t it?

The Small Business Commissioner for Victoria is doing his part to support the service. His name is Peter Lisle, and no, he is not a boring bureaucrat, he is an advocate of small business and a man who does his best to promote good ethical business development — and to help sort out any problems which might emerge along the way.

Lisle is the second Small Business Commissioner in Victoria. The first, Mark Brennan, did a great job of establishing the office as a champion for fair dealings in business and in facilitating quick, inexpensive dispute resolution.

The model is great because it helps give new business owners confidence as they start out on their entrepreneurial journey; confidence that there is an authority promoting good practice and fair dealings, and also that there is a mediation facility to help sort things out quickly if a dispute does occur.

The model has been so successful in Victoria that other states are starting to copy it. And the good thing is, they have sought the advice of the Victorian Small Business Commissioner before taking their own initiatives. Queensland and NSW are both moving, South Australia has aired some draft legislation and Western Australia is well advanced.

Again, wouldn’t it be great if they all managed to adopt a similar model. It would make life a lot easier for the Federal Minister for Small Business, Senator Nick Sherry.

Senator Sherry is also taking some creditable action of his own, announcing an intention to implement a low-cost, early intervention dispute resolution program to complement the existing state-based small business dispute resolution mechanisms currently in place or being developed. In the case of franchising, this should add a positive extra dimension to what is available through the Office of the Franchise Mediation Adviser (OFMA — similar to a franchise dispute resolution commissioner).

Triple protection

The beauty of the franchising sector, in terms of confidence for new entrants, is that the OFMA service is a mandatory service; that is, if either a franchisee or franchisor calls a dispute with the other, then both must attend an OFMA mediation. These mediations are usually concluded in a day, have a 70 to 80 percent success rate, and do not require sometimes costly legal representation.

So potential franchisees know they have a triple layer of regulatory protection: the common law, the Competition and Consumer Act and the Franchising Code of Conduct. This is a degree of regulatory protection not afforded to small business people operating outside the franchising umbrella.

Another important government-gets-it-right moment occurred in Western Australia recently, when a state parliamentary committee rejected a proposed new set of rules to apply to franchising in the state.

While the intent of the proposed rules may have been positive, the reality was that if implemented the changes would likely do more harm than good.

The proposals were raised by WA backbencher Peter Abetz and centred around a concept of a new definition of good faith negotiations between franchisors and franchisees. Abetz said the new rules would benefit franchisees, but the committee found otherwise.

The bill would be costly to implement and its purported benefits were dubious, the committee found. Even if it was implemented, it would be unlikely to improve the lot of any group in franchising.

These findings were consistent with the FCA submissions to the committee and came after a thorough investigation of the claims made by the Bill proponents before and after extensive committee hearings and an extensive list of submissions.

States are starting to choose to implement new offices of a Small Business Commissioner.

Recent amendments to the Franchising Code of Conduct and the Competition and Consumer Act marked a “significant shift” and addressed many of the problems cited in earlier inquiries, the committee found. It noted the federal government’s willingness to review the effectiveness of the recent changes in 2013 and added franchising was “most appropriately and usefully regulated at the Commonwealth level”.

The WA franchising sector acted swiftly in response to the Abetz Bill; and the national community was strong in support. The same will happen again if Abetz has future plans.

Members of the South Australian parliament should take the time to read the West Australian report to ensure they are properly apprised of the issues, should Small Business Minister Tom Koutsantonis pick up the Tony Piccolo private member’s bill from 2009. Koutsantonis announced just such an intention last year, but we are yet to see any legislation.

State support

In the meantime, other states are moving on, choosing to implement new offices of a Small Business Commissioner. South Australia has announced a similar move, but has tainted its planned initiative by linking it to the foreshadowed franchising legislation, giving rise to the possibility of a quasi-franchising commissioner with authority to make summary judgements, on matters concerning franchising legislation or regulation. Such a move would be out of step with the other states and could encourage disputes rather than resolve them, as opportunists sought to use waiting time and legal cost leverage to chisel out financial settlements. As legal eagle George Lopez said on Melbourne radio recently: “If it ain’t broke; don’t fix it.”


 

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