A newly-formed body, the National Franchisee Coalition, says it wants to strengthen the rights of franchisees and be a resource for those that have found themselves in dispute with franchisors.
The new group launched last week and, according the NSW and Queensland representative Isaac Chalik, is comprised of former and current franchisees with experience of disputes between franchisors and franchisees. Mr Chalik was locked out of his former Sumo Salad franchise in May 2011, and said the publicity resulting from the incident was the catalyst for the new group’s formation.
“The group came together when my situation gained prominence,” he told My Business. “Several franchisees campaigning on similar grounds got in touch and we said that rather than working separately we should pool resources to offer franchisees support and guidance when they are in dispute. We want their experience to be less bad, because they can feel they are alone.”
The Coalition now boasts representatives in New South Wales, Tasmania, South Australia and West Australia with the latter two states currently the focus of attention thanks to their consideration of new franchising laws that offer more protection for franchisees.
“It is proving very hard to lobby the Federal Government, Federal Small Business Minister Senator Nick Sherry sees no need for change. We are left to work with State governments and we are confident the SA and WA bills will get up: we have spoken to politicians involved and they are positive.”
But State-based laws have been criticised by the Franchise Council of Australia and Federal Small Business Minister Senator Nick Sherry, who has repeatedly pointed out that he believes the current Franchising Code offers franchisees sufficient protection and that state-based laws would represent “regulatory duplication and additional compliance burdens”.
Senator Sherry has also stated that 2010 amendments to the Franchise Code, revisions to Australian Consumer Law and new powers for the Australian Competition and Consumer Commission (ACCC) have all strengthened franchising regulations. “Like all significant reforms, these changes need time to bed down and we should allow a proper period of time to evaluate their effects,” Senator Sherry said in a late 2010 press release.
But those assurances aren’t enough for the National Franchisee Coalition, which believes they don’t offer sufficient avenues for franchisees to pursue disputes and, critically, don’t include good faith provisions.
“Hundreds of other pieces of legislation have good faith provisions,” Chalik says. “But there is nothing like that in franchising laws. That makes it hard for a franchisee that goes to court to prove that the actions of the franchisor were not in good faith. The bar is set so high at a prohibition of ‘unconscionable conduct’ that franchisors stay just below unconscionable and get away with it.”
“Secondly there are no penalty provisions for franchisors. If you sped, there are penalties. But if you [as a franchisor] act in a way that bankrupts a person there is no penalty. That is why the ACCC won’t get involved: they don’t know what is going to happen and [wonder] is it worth investing when they do not know what the penalty will be.”
This situation means franchisees are left with only legal option as a method of pursuing their grievances with franchisors, and this is too expensive for most. Many therefore walk away, or never initiate dispute resolution proceedings.
The Coalition’s initial aim, he says, is therefore to “assist franchisees who are going through disputes,” but Chalik feels the group has scope to offer wider services and advocacy.
“We don’t believe the Franchise Council of Australia represents franchisees at all,” he says. “We don’t believe them to be a representative body at all. Initially, we will help franchisees. Then we will see what happens.”
Those interested in the Coalition are urged to visit its website and contact state representatives.