Franchisee groups welcome SA small business commissioner’s bill

Franchisees have tentatively welcomed the passage of the small business commissioner’s bill in South Australia, saying it will help small businesses stand up to unscrupulous franchisors.

However, the backlash from franchisors themselves has continued, with the Franchise Council of Australia telling its members that the bill goes “way beyond” the reach of powers given to small business commissioners in other states.

Former small business minister David Beddall, who is now president of the Franchisees Association of Australia, says the creation of new laws is a “first step” to adjusting the “imbalance between franchisors and franchisees”.

“The problem with the franchise code is that it’s a mandated code with no penalty. A franchisee has to take action in a court, usually the Supreme or higher state courts, to get anything done. By that time they usually don’t have any money.”

“We’ve always said franchisee and franchisor relationships are not business to business, they are a master and serve relationship. So this is a great first step.”

Brad Skuse, state representative of the National Franchisee Coalition, agrees and says the commissioner’s act is “fantastic for all franchisees and small business owners”.

“The establishment of a small business commissioner is a major step forward to save small business owners. If there are any problems, they can get to speak to them and get an independent solution.”

Colin Dorrian, who runs the legal firm Dorrian Legal in South Australia, says while it may be too early to tell whether the bill is successful or not, “on the face of it, it does seem to assist franchisees”.

“But whether that happens in reality it’s too soon to tell. I’d be cautiously optimistic, but I also wouldn’t be cracking champagne just yet.”

The bill itself establishes the role of a small business commissioner, which will assist SMEs in solving disputes. However, the franchise industry is livid over the fact the commissioner will have the ability to change the franchising code of conduct and tailor it to the state’s desire.

The Franchise Council of Australia yesterday told its members that despite a significant effort put forward by itself and the Liberal Party, the small business commissioner will now become a reality.

“The FCA strongly opposed the SA approach which sets the scene for state-based franchising law. The Federal Minister, Senator Sherry, also emphatically opposed it,” FCA chief executive Steve Wright wrote.

“If the SA Government takes any action to change franchising rules in SA, the FCA will be seeking to activate the disallowance amendment passed by the Parliament yesterday evening.”

The FCA praised the inclusion of an amendment which means any changes to the code will need to be subject to industry consultation.

But despite the amendments, franchisees still approve. Beddall says while the vast majority of franchisors do the right thing, “there are too many to ignore”.

“This is a great step, and hopefully other states look to see this as a way forward.”