WA and SA Franchise inquiries reports expected soon

As the final hearings scheduled for the South Australian franchise inquiry wrapped up earlier this week, the reporting date for the WA Franchising Inquiry has been extended.

The WA Small Business Development Corporation, which has carried out the wide-ranging inquiry for the WA government, expects to hand its report to the WA Minister for Small Business in mid-April 2008.

A date for publication of the report from the South Australian Parliament’s Economic and Finance Committee on its franchising inquiry has not been announced but it’s likely to be in May, according to Paul Lobban, executive officer of the committee.

Lobban says the SA inquiry heard from a range of witnesses, including individual franchisees, representatives of the Franchise Council of Australia, academics and David Beddall, representing the Franchisee Association of Australia.

He says the main issues include:

• pre-purchase disclosure,
• the rights of parties before, during and after the term of the franchise agreement,
• the respective power differentiation between franchisees and franchisors,
• the effectiveness of the dispute resolution process,
• whether there needs to be an express good faith provision, and
• the effectiveness of the unconscionable conduct provisions in the Trade Practices Act

The Franchise Council of Australia has been critical of the SA and WA inquiries because most franchising regulation is federal and it has argued that additional regulation from the states would add an unnecessary burden on the industry.

Lobban said there is a question as to what the Committee can usefully recommend at a state level. But some witnesses have suggested to the Committee that state fair trading officers could have an oversight function, tracking franchise agreements and ensuring compliance with franchise regulation and greater transparency.

Such an idea is likely to meet resistance from franchisors as simply more red tape.

Leasing is also perceived as a problem by franchisees who feel shut out of the negotiation with landlords even thought they are arguably the most affected by tenancy agreements. Retail leasing is a state matter and the Committee could make recommendations on this.

However, Lobban acknowledged that many recommendations for change will have to be to the federal Minister for Small Business Craig Emerson. Emerson has so far resisted calls from franchisee representatives for a federal inquiry into franchising.

His predecessor Coalition Small Business Minister Fran Bailey held an inquiry into franchise pre-purchase disclosure regulations in 2006, resulting in some changes coming into effect on March 1 this year.

To read the transcripts of the hearings at the SA inquiry go here.