Shayne Neumann (Blair, Australian Labor Party) Share this | Hansard source

Franchising here in Australia is a $128 billion industry that employs over half a million people. From my observation in my electorate, and certainly from my experience practising as a lawyer, a lot of franchisees go into franchising having been in the military, having worked in the Public Service or having engaged in all kinds of areas and they go into this type of work in, say, their 40s or 50s. They pour their life savings into a particular venture; sometimes it is their superannuation. A 2008 Griffith University study found that the average start-up costs for a retail franchise business had risen to $262,500 and up to $1 million for bedding and furniture franchises.

Franchisees really are disadvantaged in terms of the power balance with franchisors. Franchising is really an ongoing commercial arrangement in which a party, the franchisor, authorises another, the franchisee, to use their business model, trademark or marketing techniques and strategies in return for an agreed fee and/or a proportion of sales. Here in Australia, franchising is regulated by the Franchising Code of Conduct, established in 1998. It is a mandatory industry code established under section 51AC of the Trade Practices Act 1974. In 1993 a voluntary code was established because of the high level of disputation in the franchising sector and the power imbalance in industry, but it proved to be unsuccessful—as a lot of voluntary codes do—and so a mandatory code was established. Mandatory codes have been created in the petroleum and horticulture industries as well. Franchising relationships are governed by other consumer protection provisions in the Trade Practices Act, including: section 51AC, unconscionable conduct; section 52, misleading or deceptive conduct; and section 53, false or misleading representations.

The member for Oxley is the chair of the Parliamentary Joint Committee on Corporations and Financial Services. There is a franchising inquiry which has been touring the country. The committee is approaching its task seriously with a very broad brief and an open mind, according to the member for Oxley. The inquiry has been taking submissions from stakeholders and intends to table its report on 1 December this year. Submissions will be accepted until 12 September 2008. I commend the member for Canning for raising this issue here, because this is an important issue to be discussed in the federal parliament.

There are issues of goodwill and good faith. I see that one of the wealthiest men in this country has raised the issue—and it has not just been wealthy people but also others, such as people who were my clients in my old law practice. One of the wealthiest men in Australia, Mr Jack Cowin, raised this issue and has been putting pressure on the federal government since US food giant Yum! Restaurants International refused to renew one of his KFC franchising agreements and was not prepared to recognise goodwill established over 30 years of continuous operation.

In my previous life I practised as a family lawyer. There were many cases involving franchise agreements and franchises which, apart from the matrimonial home, were the major matrimonial assets. Getting valuations done was difficult because franchisees were at a great disadvantage compared to franchisors. I hope that the inquiry comes down very much on the side of franchisees because of the financial disadvantage they have. They have almost a ‘take it or leave it’ relationship with franchisors. Anecdotally, and from what constituents have said to me, there is a certain degree of bullying and harassment in the industry. I hope that those people who have experienced that will come forward and make submissions to the inquiry. It will take a lot of courage because a lot of them will continue to be in the industry.

Good faith provisions need to be put into this legislation. Goodwill needs to be put into this legislation. I hope that in future franchisees will have the same rights as franchisors. I hope that the trade practices legislation can be toughened and the code of conduct strengthened also.

I want to thank the member for Canning for raising this issue. I think there is merit in what he has to say. I think unconscionable conduct is a disgrace. As long as we can help franchises, that is good for business and that is good for individuals in his electorate and in mine.

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