SA takes franchising into brave new world

For South Australian Labor MP Tony Piccolo, the passing of the state’s new Small Business Commissioner’s Act on Friday was a watershed moment.

For years Piccolo has campaigned on behalf of franchisees to get Australia’s franchised laws strengthened to protect who he sees as the weaker little guys of the sector.

Having led the SA Parliament to conduct an inquiry on the state of the sector and then successfully pushed for the Federal Parliament to conduct its own inquiry, Piccolo was disappointed when the Federal Government decided not to include a provision for franchisors and franchisees to act in “good faith” in a set of reforms to the national Franchising Code of Conduct.

So he decided South Australia would go it alone, introducing a set of state-based franchising laws that would extend the national Code and include good faith.

The South Australian Small Commissioner Act is the culmination of those years of fighting – although it’s not exactly the specific state-based franchising laws that Tony Piccolo had in mind when he started his campaign.

The Commissioner Act is quite a complex beast. As well as setting up a Commissioner’s office – which will operate in a similar way to existing small business commissioners in Victoria and New South Wales – the Act allows the Government to establish mandatory codes of conduct over certain sectors, such as franchising.

To some groups, such as the Franchise Council of Australia, the way potential sweeping changes to the franchising sector have been placed inside another big piece of legislation is wrong. It was only after a last-minute amendment by South Australia’s Family First party that the Government will now at least need to consult with industry before the introduction of a code.

While this suggests that we’ll see another huge barney between the FCA and franchisee campaigners when it comes time to draft the Code, no one should be in any doubt that Piccolo has won the war, even if there are few skirmishes to come.

“Quite simply, South Australia will be the safest place in Australia for small business to set up shop,” Piccolo said at the weekend.

“Mum and Dad business owners work incredibly long hours and often invest all their savings in setting up new businesses only to be brought down by rogue franchisors. The bill is very fair as it expects all parties to a business-to-business transaction to act in good faith and not just franchisors.

“The bill and subsequent codes will go some way towards correcting the current huge power imbalance between a franchisor and franchisee.”

I fully applaud the establishment of a Small Business Commissioner in South Australia. These offices have worked well in places like Victoria and provide access for SMEs to a range of vital services.

But I am just not sure I like the way the ability to establish as new franchising code of conduct has been placed inside this bill.

While we are yet to see exactly what the SA code might contain, I share the philosophical standpoint of Federal Small Business Minister Nick Sherry, who has said repeatedly that any move away from harmonised national laws is a bad move.

Franchising is an important national sector and years of hard work have gone into developing, implementing and refining the national code. Regular reviews are being made – the next is due for 2013 – backed by detailed inquiries that encourage submissions from all sections of the franchise industry.

At a time when the nation is striving to harmonise laws such as OHS and even payroll tax, the idea that franchisors that operate in South Australia and other states should have to deal with two separate industry codes is ridiculous.

While proponents of the state-based code will probably say that those who do nothing wrong will have nothing to worry about, that is garbage.

Franchisors who operate in South Australia and other states, or are looking at entering South Australia, will be forced to buy legal advice almost immediately to gauge how the new SA laws might affect them.

They may need new processes and systems. They might need ongoing access to legal experts with specific SA franchising expertise. And you can count on another lawyers’ picnic when people start testing the new SA code.

This morning, prominent South Australian franchisor Mark Langford has told SmartCompany that he will not be opening any new stores in South Australia as a protest at the bill.

I expect franchisors around Australia who may be looking to expand into South Australia will also think twice.

Franchising is hard enough. Who needs another layer of uncertainty and complexity?