In view of the current Federal Election campaign, Franchise News & Events recently asked both the Government and the Opposition parties about their future plans for franchising.

A request for a Franchising Policy Statement was simultaneously sent to both Fran Bailey MP, Minister for Small Business & Tourism, as well as Dr Craig Emerson MP, Shadow Minister for Service Economy, Small Business & Independent Contractors.

Each party was asked to give consideration to a number of issues in their statement. Read on for more information and to see the official responses outlining how franchising will be approached by either side if they win Government on November 24...

Coalition Franchising Policy Statement – Click here

ALP Franchising Policy Statement – Click here

Each party was asked to give consideration to the following in their statement:

Regulation – Is the current regulatory environment for the franchise sector adequate? Please elaborate your answer (if either in the negative or the affirmative). If more regulation is required, what sort of regulation would this be, and when and how would it be introduced?

Enforcement – Is the existing structure of the ACCC adequate to enforce the current (or any proposed future additional) regulation of the sector? If not, what alternative enforcement models would be considered?

Industrial Relations – What concerns (if any) are held for the impact of current or future WorkChoices legislation on the sustainability of the franchise sector, given that it is a large employer, particularly of young Australians? What (if any) industrial relations framework should exist between franchisors and franchisees themselves?

Retail Leasing – A common theme among published submissions to the Productivity Commission’s Retail Leasing Inquiry is that there should be a national, not state-based regulatory framework for retail leasing. Do you support this concept? (Please elaborate on your answer). Are there other issues in relation to retail leasing that will serve as the basis for new (or modified) policy going forward? If so, please detail.

Statements were requested to be limited to a maximum of 2,000, include a bullet-point summary, and be submitted in time for inclusion in the October 25 issue of Franchise News & Events.

As at the publishing date, only the Policy Statement from Dr Emerson, Shadow Minister for Service Economy, Small Business & Independent Contractors, had been received. Ms Bailey’s office confirmed they had received the statement request, but were unable to provide a response in the given timeframe. Franchise News & Events will include details of any response in a future edition.

ALP Franchising Policy Statement (October 24, 2007) 

Dr Craig Emerson, Shadow Minister for Service Economy, Small Business & Independent Contractors (ALP)

Summary:

• The franchise sector is one of the big success stories of the Australian economy.  Labor supports reward for effort, risk taking and entrepreneurship and we have applied these values to our policies.  It’s why Labor supports franchising as a good small business model.
• Labor will build capacity for franchises through investing in education, skills development and broadband.
• Labor supports improved franchisor disclosure and Labor believes that the Franchise Code should include good faith obligations as long as the scope of this obligation is well defined.
• Labor will give real teeth to the ACCC under a strengthened Trade Practices Act.  Labor has developed amendments to section 46 of the Trade Practices Act dealing with abuse of market power and predatory pricing. 
• Labor wants to make it easier to start and run a successful business.  We believe business owners have great aspirations that are important to our long-term economic future.

Introduction

The franchise sector is one of the big success stories of the Australian economy.  Labor supports reward for effort, risk taking and entrepreneurship and we have applied these values to our policies.  It’s why Labor supports franchising as a good small business model.

The modern Labor Party understands the risks that franchisees take in going out on their own.  We understand that they make sacrifices in trying to balance work and family life.  If they don’t have clients or sales, nobody pays them and nobody pays the bills. They don’t get sick pay, or holiday pay, or annual leave – or leave loadings, or penalty rates.   If they are at home sick or injured, the money doesn’t come in. They have to provide for their own superannuation.

With insecure incomes, all business owners need to fight for every bit of business.

Building capacity for the future of franchising

Kevin Rudd is an economic conservative.  By running a responsible Budget policy, Labor will help put downward pressure on interest rates.

Building capacity through investing in education, skills development and broadband is directed at one goal – raising productivity in Australian workplaces.

Australian franchises need reliable fast broadband services that are good value for money, to take up opportunities and to compete in an increasingly global marketplace.  Australian small businesses need access to better staff trained through Labor’s Education Revolution.

Under Labor’s BAS Easy, small businesses will have the option of taking a monthly snapshot of their GST transactions just twice a year.  They would then apply the resulting ratio to their GST sales for the rest of the year.  Suppose for a business, for those two months, the net GST payable after deducting input tax credits averaged 5.5 per cent.  For the rest of the year, the business would simply multiply its GST sales by 5.5 per cent.  No annual reconciliations would be required.

Labor will create a Superannuation Clearing House.  Under the Howard Government’s legislation providing for choice of superannuation fund, businesses can be required to make superannuation payments to several different funds.  This has imposed more form-filling and checking, cost and legal liability on small businesses.  Labor will retain the choice of fund legislation but implement it in a far simpler manner, allowing businesses the option of making payments into a central superannuation clearing house. Small businesses with less than 20 employees would receive this service free of charge.

Improved franchisor disclosure

The Government’s proposed changes to the Franchising Code are an overall improvement.  The improvements in the Code enhance disclosure and assist prospective franchisees to make an informed decision when entering into a franchise agreement.

Labor strongly supports the disclosure of the details and history of the franchise site and the names, location and contact details of past franchisees that have been terminated, transferred the franchise or otherwise exited the system, subject to privacy issues and franchisee consent.

The Government declined to endorse a number of recommendations from the Matthews Committee including an obligation on the parties to negotiate and act in good faith.  While Labor supports the Government in rejecting a number of Matthews Committee recommendations, Labor believes that the Code should include good faith obligations as long as the scope of this obligation is well defined.

Stopping predatory pricing and cartels

Trade practices laws are also very important to franchisees as managers and owners of small businesses.  A Rudd Labor Government would amend the Trade Practices Act to crack down on abuse of market power by bigger businesses in dealing with small businesses.

Labor will give real teeth to the ACCC under a strengthened Trade Practices Act.  Labor has developed amendments to section 46 of the Trade Practices Act dealing with abuse of market power and predatory pricing.  Under Labor, businesses will be able to use the less costly Federal Magistrates Court to pursue predatory pricing cases.

Labor will also give the ACCC more powers to investigate predatory pricing as well as to crack down on and prosecute serious cartel conduct as a criminal offence.

Labor will give the ACCC the capacity to review ‘creeping acquisitions’ which lead to market concentration.  Currently the ACCC cannot take account of recent acquisitions in assessing whether a purchase of a small business by a bigger business is anti-competitive. 

Better industrial relations:

Simplified awards

Labor will greatly simplify the awards system, on which most small businesses rely – a task shirked by the Howard Government.  Awards will have a special facilitative clause that gives small businesses much greater flexibility in negotiating and tailoring arrangements with individual employees.  Labor will provide sensible transitional arrangements to the new system to give small businesses certainty. 

Streamlined employment protection

Labor recognises that the overwhelming majority of small business owners value their staff highly and treat them fairly.  But situations of unfair dismissal can and do arise.  Labor wants to treat both small businesses and their employees fairly.  We will not go back to the old unfair dismissal laws.

Labor’s unfair dismissal system for small businesses will give small business owners a full 12 months to assess whether or not they have a good employee.  During that time the unfair dismissal laws will not operate.

A full year should give small business operators the time to make an evaluation about whether new employees are fitting into their business.

After the 12 months qualifying period, the process for dealing with any unfair dismissal claims will be simple.  Recognising that small business owners don’t often have the time to go through complex procedures when it comes to dismissing an employee, Labor will, in consultation with small business, develop a Fair Dismissal Code.

This Code will be a clear and concise reference point for small business to help employers.  Where an employer has complied with the Code, the dismissal will be considered a fair dismissal.  And where a dispute arises, the emphasis will be on mediation: there will be no go-away money.

Under Labor’s Fair Dismissal Code, where an employer has reported an employee to the police for suspected theft or fraud, or for violence in the workplace, the dismissal will be a fair dismissal.  Employees who engage in stealing, violence, disruption or inappropriate sexual behaviour will not be protected from dismissal.

Where a small business owner has suffered a downturn and needs to reduce staff, the dismissal is a redundancy and is therefore a fair dismissal.  If a small business needs fewer staff due to the use of new technologies this, too, is a redundancy and the unfair dismissal laws don’t apply.

Labor’s is a balanced approach to the dismissal of staff.  Under-performing and redundant staff can be dismissed readily.  Staff will not be protected if their conduct in a workplace is inappropriate.  But good staff should have some protection from unfair dismissal.

Tough right of entry and industrial action laws

Labor will maintain the existing right of entry rules.  Labor will ensure that only fit and proper persons hold a right of entry permit and that permit holders understand the right to enter another’s premises comes with significant responsibilities.

Labor will be tough on industrial action in breach of Labor’s laws. Labor’s new industrial relations system will not permit industrial action being taken outside our clear, tough rules. Industrial action will only be protected from legal sanction if it is taken during a bargaining period for a collective agreement and is authorised by a mandatory secret ballot. Under Labor the current law dealing with secondary boycotts will remain. Under Labor, the current direct remedies to deal with unprotected industrial action will also remain.

The future for business regulation reform

 A fresh wave of regulatory reform is needed, built on the successful National Competition Policy model.  The Productivity Commission has highlighted the current state of business regulation:  ‘The cumulative impact of the growth in regulation is that business is subject to a vast and complex assortment of regulation … This burden tends to fall more heavily on Australia’s many small businesses which have less capacity to deal with it’. [1]

The Productivity Commission estimates the costs of complying with business regulation at up to four per cent of GDP, which amounts to around $40 billion per annum. [2] International experience suggests that a 20 per cent reduction in compliance costs might be achievable, potentially saving business as much as $8 billion a year.  The efficiency gains from removing unnecessary regulation could be at least as large, doubling the overall benefits to the economy to around $16 billion. [3]

Labor believes that when making new regulations, governments should remove an existing regulation and should design rules with small businesses in mind.  We call this approach ‘think small’.  It will require government departments and agencies to better understand the realities faced by businesses on the ground. Labor will adopt a ‘one-in, one-out’ principle for federal government regulation.   This means that when a new regulation is proposed it must be accompanied by a proposal to remove an existing regulation.

Labor leader Kevin Rudd set the objective at the National Press Club in April 2007 of harmonising key business regulations across the states and territories within five years.  Labor will undertake this comprehensive program of removing productivity-stifling business regulation.

Kevin Rudd announced that a Labor government would make the Productivity Commission through the COAG Reform Council responsible under statute for estimating the costs and benefits of harmonisation in each key area.  Recognising that there are significant national benefits from such reforms, a Federal Labor government would provide a financial incentive to reward state and territory governments that implement the reforms. Federal Labor will reward results and not just promises, using a model similar to that which existed under the National Competition Policy reforms.

Leases

Labor recognises that there are different retail leasing laws and regulations in each state and territory. 

This includes state and territory governments not having standardised retail tenancy documentation, including minimum lease requirements and disclosure statements. 

The registration of leases allows all parties in the market for a lease to know the current rental value of a site and the rents of neighbouring sites.  This provides tenants with more information to assess whether the lease site is good value.

Labor is also encouraged by the success of mediation procedures for resolving retail lease disputes.  In New South Wales, Queensland and Victoria, retail lease disputes are successfully resolved through mediation in at least 75 per cent of cases.  The Victorian approach implemented through the Victorian Small Business Commissioner is a very low cost service where each party pays only $95 for a mediation session.  

Conclusion

Labor’s policies for the franchise sector are designed to help build business capacity and to remove barriers to business growth in a stable economic environment.  Labor wants to make it easier to start and run a successful business.  We believe business owners have great aspirations that are important to our long-term economic future.

[3] Ibid.

Coalition Franchising Policy Statement (October 25, 2007)

Mr Jason Gehrke
Director
Franchise Advisory Centre
PO Box 15304
BRISBANE CITY EAST QLD 4002

Dear Mr Gehrke

On behalf of Coalition Members of Parliament and candidates, I have attached a response to your recent e-mail.

Thank you for providing the opportunity to outline the views of the Coalition on these important issues.

I believe the choice at the coming election will be the starkest for a generation and you can be assured our policies reflect both the plans and experiences of the Government, in contrast to the risk posed by a Labor Party with 70 percent of its front bench drawn from trade unions.

In particular, we will be asking Australians to consider which party can best grow a vibrant economy creating employment and prosperity for individual Australians and the means by which government can invest further in areas such as health, education, the environment and assisting the disadvantaged.

The Coalition’s early announcement of a bold, wide-ranging tax reform plan to significantly reduce taxes for all individual taxpayers is in example of what is possible through disciplined economic management over many years.

Throughout the election campaign we will be progressively announcing further policies outlining our vision for Australia’s future.

Once announced, these policies will be available at www.liberal.org.au and www.nationals.org.au.

Once again, thank you for helping us to communicate the Coalition’s plan for Australia to your members.

Brian Loughnane
Federal Campaign Director

COALITION RESPONSE TO FRANCHISE NEWS AND EVENTS

1. Regulation: Is the current regulatory environment for the franchise sector adequate? If more regulation is required, what sort of regulation would this be, and when and how would it be introduced?

The Coalition Government believes that it is important to protect both franchisees and franchisors from misleading and deceptive practices, unconscionable conduct and misuse of market power.

The franchising sector is regulated by both state and territory legislation and regulators, as well as commonwealth legislation and the national competition regulator, the Australian Competition and Consumer Commission (ACCC). Since the last election the Government has delivered on some key initiatives for the franchise sector including:

• Increasing the penalties for anticompetitive conduct, to the greater of $10 million, or three times  the benefit from the contravention or 10 per cent of the value of the turnover of the corporation which will increase the deterrent effect;
• The introduction of a new predatory pricing prohibition against a corporation with a substantial share of a market from engaging in sustained below-cost pricing with an anti-competitive purpose;
• Strengthening the Franchising Code of Conduct to increase disclosure and protections for people entering into franchise arrangements;
• Making it easier for the ACCC to go after businesses who misuse their market power for anti-competitive purposes;
• Stronger protections for small business from unconscionable conduct including in relation to unilateral variation of contract terms;
• Increasing the powers of the ACCC, by enabling it to obtain a search warrant to enter premises and seize documents and evidence;
• Establishing a second Deputy Chairperson position for the ACCC, with the position to be filled by a candidate who is experienced in small business matters;
• Removing the job-destroying unfair dismissal burden from small business;
• A more rigorous regulatory framework to ensure that only new regulation ion that is necessary is introduced by the Coalition Government; and that each year the Productivity Commission identifies regulation that is unnecessarily burdensome, complex or redundant for removal or simplification;
• Putting pressure on the states and territories governments to also improve their regulation making and review processes through the Council of Coalition Governments procedure in identified regulatory “hotspots” such as Occupational Health and Safety legislation; and
• Benchmarking the states and territories in relation to the regulatory compliance costs associated with doing business.
  

The Government has introduced a bill to enable the ACCC to seek compensation on behalf of businesses who have suffered loss or damage as a result of illegal secondary boycott conduct. The amendments proposed by the Government will enable the ACCC to obtain compensation for those businesses that cannot fight for themselves.

The Government will also introduce a bill to apply criminal penalties for serious cartel conduct.

The Government will continue to monitor current regulation to ensure that it is working as intended.

Finally, the Productivity Commission’s Review of Retail Tenancy will release its recommendations at the end of this year and the Government will assess their recommendations very carefully.

2. Enforcement: Is the existing structure of the ACCC adequate to enforce the current (or any proposed future additional) regulation of the sector? If not, what alternative enforcement models would be considered?

The ACCC is only one of the regulators that regulates the franchise sector. Each state and territory have their own regulators that also regulate the sector.

The ACCC has extremely strong and broad powers to obtain information, documents and evidence, For example, s155 of the Trade Practices Act (TPA) enables the ACCC to require a person to provide information to the ACCC, to produce documents to the ACCC, or to appear before the ACCC, in relation to a suspected contravention of the TPA.

Further, we enhanced the ACCC’s enforcement powers by enabling it to obtain a search warrant to enter premises and seize documents and evidence. In addition, we have continued to increase the funding provided to the ACCC.

3. Industrial Relations: What concerns, if any, are held for the impact of current or future WorkChoices legislation on the sustainability of the franchise sector, given that it is a large employer, particularly of young Australians? What (if any) industrial relations framework should exist between franchisors and franchisees themselves? 

The Coalition Government believes in flexibility in the workplace and that it is important to get the regulatory balance right so that business can get on with doing business rather than being caught up in unnecessary red tape.

The Coalition Government’s economic management, including its reform of the workplace relations system, has created opportunities for business investment and expansion and the most positive employment environment in more than 30 years.

The Coalition Government’s reforms to the workplace relations system have resulted in a simplified, national workplace relations system through reducing the duplication and overlap that previously existed. This means less complexity for employers and employees and lower costs for businesses.

There is now just one set of rules and regulations in stark contrast to the 130 pieces of legislation in competing state and federal jurisdictions that previously existed.

Youth unemployment is at its lowest in decades and the Workplace Relations Act includes provisions relating to young people employed in the franchise sector that include:

• Minimum rates of pay as set by the Australian Fair Pay Commission;
• Guaranteed access to penalty rates in Awards, or where different arrangements are negotiated, the independent Workplace Authority will apply the Fairness Test to ensure that fair compensation is provided to the employee.
• Rights to 4 weeks annual leave, 10 days personal/carers leave, unpaid parental leave and compassionate leave;
• Protections that make it illegal for an employer to apply duress to a young person when negotiating a
• workplace agreement;
• The requirement that employees under 18 years must have their AWA co-signed by an adult (if that is what they are to be employed under);
• Prohibitions against dismissing someone on the basis of age; and
• The entitlement to have someone represent them as their bargaining agent to negotiate on their behalf. They are entitled to choose their bargaining agent without any undue or unfair interference from any other person.
  

The Coalition Government’s workplace relations system provides the widest range of agreement-making options, including:

• Australian Workplace Agreements;

• employee collective agreements;

• union collective agreements,

• union greenfields agreements; and

• employer greenfields agreements.

These options allow employers and employees in the franchise sector to make the type of agreement that suit their individual needs based on the foundation of the strong safety net provided by the minimum conditions under the Workplace Relations Act and the operation of Fairness Test.

If employment relationships exist between franchisors and franchisees which are constitutional corporations, they will be subject to the operation of the federal workplace relations system.

4. Retail Leasing: A common theme among published submissions to the PC’s Retail Leasing inquiry is that there should be a national, not state-based regulatory framework for retail leasing. Do you support this concept? Are there any other issues in relation to retail Ieasing that will serve as the basis for new or modified) policy going forward?

Whilst the regulation of retail tenancy leases falls under state legislation, the Government responded to small business concerns that the current state regulatory framework around retail tenancy leases was not working and commissioned the Productivity Commission to examine retail tenancy issues and provide recommendations.

The Productivity Commission is due to report on 21 December 2007 and the Government will carefully examine its recommendations.

End