What most people forget about the Franchising Code of ConductBy Mike Padden
Leave the grill and give up serving customers for a few minutes. I’m sure your busy but there’s another review of the Franchising Code of Conduct happening.
Since 1998 when the Code was introduced there’s probably been twenty Federal Ministers for Small Business and indeed we have had five in the last three years! The current review of the Code of Conduct is to report in May and by the time the changes are drafted who knows but by then we may have another!
Now I guess you’re a successful restaurateur, a franchisor or a franchise owner or even worse you are thinking of expanding by becoming a franchisor. Think again!
You would be much better off starting a new career as a lawyer or even as a politician! Think about it.
We have a wonderful system called franchising which has helped many entrepreneurs to either start a franchise system or by becoming a franchise owner earn a decent living for themselves and at the same time keep their family members active, clothed and fed.
It is pretty hard running a retail food business when the cost percentages keep climbing. Rent, ingredients, energy, and labour they never fall as dramatically as they increase. Profit margins seem to shrink as we push to increase our turnover. Way things go these days you might as well add a hefty percentage to your costs for the services of a local law firm as the next customer might sue because your menu didn’t warn them of the dangers of cholesterol! Business is tough at the moment and inflated liability costs don’t help.
And here is the rub if you have a pretty good concept and you become a franchisor and have a system that is making money and a future for most of your franchisees (but one fails) you can well be staring into the jaws of disaster. You may need a lawyer to counter claims of unconscionable behaviour, of not acting in good faith, of inadvertently poorly advising or informing the franchisee you started out hoping and helping to succeed!
The extraordinary thing is that nowadays if something goes wrong it is somebody else who must be responsible. So it’s bound to be you and its most likely better to give in than let the matter be fought over in the courts!
There’s no doubt there are quite a few instances where poor decisions (even downright stupid choices) by an emerging franchisor or their franchise recruitment officer desperate to grow the system end up recruiting a franchisee who just can’t cut it.
Going into business is fraught with difficulty and no one knows with certainty what the outcome will be. None of us seek failure and all of us would love to have sufficient information about factors such as the capability of the franchisor to make effective decisions to avoid their and our potential for failure.
So once again the politicians and their advisers are tinkering around the edge of the Code in order to create “a level playing field”. Give me a break all a prospective franchisee wants is no upfront cost of entry to the system, no ongoing payments to the franchisor, and a healthy lump sum from either the franchisor or the bunny who buys the business when they decide to walk away. Think about it