Small business minister backflip on franchise law reform

Federal Small Business Minister Fran Bailey has reportedly promised, if re-elected on Saturday, to amend the Trade Practices Act to prevent bullying tactics in franchising.

Her comments, reported in the West Australian newspaper, follow the dispute between Jack Cowin’s Competitive Foods, which operates 45 KFC franchises in WA, and Yum Restaurants International, which owns the KFC brand.

Yum is refusing to renew the long-term franchise licenses held by Competitive Foods in Western Australia. The first to close was the Rockingham, Perth, store. It closed its doors on the weekend for the last time. The next franchise agreement is due for renewal late 2008. Yum has offered to buy the Competitive Foods’ KFC operations.

The Minister’s comments are surprising given the Coalition recently ordered a review of the Franchising Code of Conduct under the Trade Practices Act and adopted some of its recommendations.

More recently, the Coalition suggested there would not be any further reform of franchising law, according to its answers to questions on franchising policy posed to both major parties by a franchise industry newsletter.

The Coalition’s response does not make any promises for future law reform; although it does promise to assess the recommendations of the Productivity Commission’s review of retail tenancy “very carefully”. Also it will introduce a bill to apply criminal penalties for serious cartel conduct.

Not everyone in the franchising industry supports further changes to franchising law. The Franchise Council of Australia has come out very strongly against the WA Government inquiry into franchising, announced following the public airing of Jack Cowin’s dispute.

FCA director Stephen Giles says if there is an issue in franchising it is a national issue, and a state inquiry will simply create additional red tape and bureaucracy.

Bailey’s office did not return SmartCompany’s call before publication.