FCA's Bruce Billson calls for stricter enforcement of Franchising Code of Conduct
The former minister also says the council is looking into a brand ranking system for potential franchisees.
Further regulation will not stop incidences of poor standards and behaviour in franchising but better compliance to its code of conduct will, according to Franchise Council of Australia (FCA) executive chairman Bruce Billson.
Speaking to industry leaders at the 2018 QSR Media Detpak Conference and Awards, the former minister says the code needs to be “actually enforced” and notes that the Australian Competition and Consumer Commission (ACCC) has assured the FCA that “they are an active regulator.”
“We have proposed that the ACCC be given more resources so they can collect adequate data, investigate claims of wrongdoing and where breaches occur – take necessary action,” Billson said, amid ongoing public hearings into the effectiveness of the code due to recent allegations of misconduct against large franchising networks.
He adds that the code needs to be better understood due to a strengthened version came into operation in January 2015, which he says improved its operations and included specific penalties for breaches while strengthening the ACCC’s enforcement powers.
“It’s got strong penalties for non-compliance, enhanced disclosure requirements, a pre-contractual process to mitigate risk, explicit recommendations about seeking legal, accounting and business advice, mandatory contractual requirements around the transfer and termination arrangements and dispute resolution, protections around our marketing funds are used, and undisclosed capital expenditure. It also included a new reciprocal obligation to act in good faith.”
Seeing trends in new franchise recruitment, Billson also thinks the code needs to be translated into key languages and notes that the code encourages franchisees to seek professional advice.
“The FCA is actually recommended that we should make it mandatory to obtain legal accounting and business advice to inform prospective franchisees about what's in the disclosure document and also the nature of the investment they're contemplating,” he added.
Rating system for franchisors
Billson also disclosed that the FCA is looking to potentially develop a “star-rating system”, modeled after Forbes’s own franchising ranking list, in order to showcase franchise owners so they “get the credit and recognition for all that they're doing right.”
Acknowledging the spotlight on franchising as of late, he also said that the council is building a “comprehensive strategy to reset the public narrative” and stresses that restoration of confidence in the franchise sector is a collective effort that should be done with “unity and collegiality.”
“Healthy franchising is built on the foundation of successful franchises. In this age of attribution, of big-versus-small, villains-and-victims and the tensions that are inherent in the relationship of co-dependency, the franchisee voice and stories are powerful in shaping the perceptions of our sector. Together, we've got to facilitate encourage franchisee business owners to share their positive stories, their path-finding journeys to small businesses and family enterprise success. Our weakest link exposes us for all criticism and condemnation."
