Franchising

Tuesday, May 16, 2017

Around 8 years ago, we (ICA) were approaching the banks about supporting the introduction of unfair contract laws for small business people. One of the big bank’s chief legal counsel said to us “We’ll only do what we’re made to do!” What a sad attitude. But, unfortunately, in our dealings with many at the ‘big end of town’, that’s our experience with them.

Unfair contract protections

It took us ten years of hard advocacy, but late last year the small business unfair contract laws took effect. Now the change is happening. In The Australian yesterday Robert Gottliebsen detailed how the ACCC has forced Sensis to fix unfair contract clauses. Sensis had concealed clauses that renewed contracts without the small businessperson agreeing. Sensis could cancel contracts but the small businessperson could not. Sensis has agreed to make refunds.

Vulnerable Workers Bill

Yesterday we released our detailed analysis of core clauses in the Vulnerable Workers Bill. Again, the big end of town—this time the Franchise Council of Australia—wants to ‘kill the bill’.  Our view is that the FCA is trying to exclude franchisors from being responsible. We strongly support the Bill and we’re asking Senators to vote for it with the current wording.

Yesterday in the Australian Financial Review, Adele Ferguson detailed the legal case being conducted by bankrupt Pizza Hut franchisees against Pizza Hut. The claim is that Pizza Hut required the franchisees to conduct a price war that resulted in the franchisees going broke. The case highlights how franchisor behaviour can create franchisee disaster.

The Vulnerable Workers Bill is about preventing underpayment of franchise workers. But the structure of the Bill is really about the 1,100 franchisors exercising their proper responsibilities towards their 79,000 small business franchisees.

Pay on time!

We’re pleased to see the campaign being conducted by the Federal Small Business Ombudsman, Kate Carnell, to get big businesses to pay small businesses on time. She’s calling for legislation and has given the example of New York’s ‘pay on time laws’ as a model. We agree with Kate that legislation is needed. Our experience is that big business will use voluntary codes to appear to do something, but in reality do nothing.

Sunday, May 14, 2017

It’s getting close to decision time in the Senate! Remember the 7-Eleven wages fraud scandal exposed by 4Corners/Fairfax late 2015? The scandal has spread since then with Pizza Hut, Domino’s Pizza, Caltex and United Petroleum being caught out underpaying workers.

The Federal government has put forward legislation (The Vulnerable Workers Bill) that will require franchisors to be at least partly responsible if underpayment occurs. We strongly support the Bill. It will force franchisors to properly support the 79,000 small business franchisees to prevent underpayment.

We’ve talked about the Franchise Council of Australia before. When the current FCA chair Bruce Billson was Shadow Small Business Minister, he said of the franchisors’ body: “The FCA’s advice … is quite unconscionable in its intentional omissions and misrepresentations.” This should raise ‘red flags’ about the FCA’s current opposition to the new law.

We have completed a careful analysis of the core changes the FCA is lobbying to have made to the Bill. We look at the implications of key words and how the FCA changes would neuter the Bill.

Here’s our analysis.

In summary we say:

• The current wording of the Vulnerable Workers Bill has the practical effect of requiring franchisors to exercise their responsibility to franchisees.
• The wording of the Bill desired by the Franchise Council of Australia would enable franchisors to avoid their responsibility to franchisees.
• This FCA version would ‘dump’ all responsibility onto franchisees and remove franchisors from responsibility. It would weaken the Australian franchise system because it weakens the support that franchisors are supposed to supply to franchisees.
• The FCA’s version is harmful not only to the 79,000 small business franchisees in Australia but to their thousands of workers as well.

We are putting in a strong effort asking Senators to pass the Bill substantially as is.