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Address to the 2011 National Franchising Convention: Sebel, Albert Park, Melbourne

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Good afternoon.

My thanks to the Franchise Council of Australia, your Chairman Stephen Giles and Executive Director Steve Wright, for inviting me to speak today.

Rod Sims, Chairman of the Australian Competition and Consumer Commission, is also with us.

Since I spoke to you at last year’s convention, tough financial times have resulted in a shift in the way the franchise sector does business.

In 2008, there were 71,400 franchises employing 413,500 employees and generating turnover for the sector of $130 billion.

That was before the full impact of the Global Financial Crisis. Since then, there’s been a decline in the number of franchise units and significant growth in casual versus full-time staff numbers.

Figures from Griffith University's biennial survey in 2010 revealed Australia’s 70,000 franchises employed 690,000 people. However, casual employment had almost trebled between 2008 and 2010, from 162,000 to 457,000. Casual staff made up 66 per cent of the total workforce in 2010, compared to 39 per cent in 2008.

It’s testament to your business acumen that the sector still managed to turn over $128 billion. That’s a minuscule drop given the unprecedented financial storm, which continues to hit most of the world’s advanced economies.

Australia is a notable exception. We have half the unemployment rate of Europe and North America and a growing economy.

The Government’s rapid, targeted and temporary stimulus measures protected the Australian economy from the worst effects of the GFC.

GFC or not, these figures indicate Australians continue to regard franchising as an opportunity to fulfill their dream of running a business.

IMF World Economic Outlook

Many of you continue to deal with tough trading conditions with consumers changing their spending habits and tightening their wallets.

In last month’s World Economic Outlook report, the IMF downgraded its global growth forecasts, projecting that world economic growth would slow from 5.1 per cent in 2010 to 4 per cent in 2011 and 2012.

The fund also warns the global fiscal environment remains subject to a high degree of risk.

However, the IMF forecast for Australia in 2012 is significantly brighter than other advanced economies,

Despite our natural disasters over the past year, the IMF forecasts 3.3 per cent growth for Australia, well above the 1.9 per cent for advanced economies as a whole.

The IMF says the Australian economy is fundamentally strong and well-positioned to ride out global economic instability and that it will benefit from the strong growth forecast in the Asian region.

All of which points to Australia remaining a great place to start and run a business.

Franchising regulation

I can see the attraction of the franchise system as an entry to business. A well thought-out franchise, where much of the establishment work is already in hand, makes a lot of sense.

Franchisees can rest assured that the Government’s commitment applies equally to them as it does to small business in general.

It’s a commitment to ensure all businesses can operate in an open, fair and competitive environment.

With franchising, the Australian Government believes there needs to be an appropriate national regulatory framework, allowing the sector to operate with confidence - and without intrusion and restriction.

Our amendments to the Franchising Code of Conduct came into force in July last year, giving the sector greater protection, transparency and certainty.

We stand firmly behind a national approach to franchising and we do not intend to review the Code of Conduct before 2013. This will allow sufficient time for the 2010 amendments to provide an informed evaluation.

I’ve raised this point on several occasions, and once again refer to the intention of South Australia and Western Australia to consider their own franchising legislation.

The Government welcomes the WA Parliamentary Committee’s opposition to the State’s Franchising Bill, and the Committee’s finding that franchising is best regulated at the Commonwealth level.

The proposed state bills may impact on, or duplicate, the Commonwealth franchising regulations.

After 110 years of Federation, I find it strange states still believe there’s mileage in trying to go it alone when there’s so much more benefit in the national approach to law making.

Cross-border differences are the reason the Council of Australian Governments adopted its reform program under the Partnership Agreement to deliver a Seamless National Economy.

I know national franchises won’t be impressed if they have to run the gauntlet of state business regimes to operate in either South Australia or Western Australia.

This also flies in the face of significant progress to date to COAG’s seamless national economy agenda - for example, the Government’s intention to introduce a single national business registration system.

This will save businesses operating across borders a lot of time in multiple registration processes in each state and territory, as well as significant cost savings in registration fees.

Under the new system, firms will only pay one fee of around $70 to register a business name nationally for three years - a substantial saving considering a firm operating and registering in every State and Territory currently faces a bill of around a thousand dollars.

Together with related initiatives such as the Australian Business Licence Information Service and the Australian Business Account, the benefits of the national business names registration system amount to $1.5 billion over eight years.

Competition reforms

The Government’s wider Competition reforms will also better protect franchisees from unfair practices, with a range of new enforcement provisions under the Competition and Consumer Act 2010.

I hope you were able to take part in the conference discussion on the Act yesterday.

One of the new provisions is for tougher penalties for corporations and individuals engaging in unconscionable conduct or making false or misleading representations.

The new penalties are $1.1 million for corporations and $220,000 for individuals.

A range of new enforcement powers for the Australian Competition and Consumer Commission (ACCC) were also introduced in January this year.

The ACCC can now:

· issue public warning notices for serious Franchising Code breaches;

· undertake random audits; and

· issue notices requiring parties to provide information substantiating their claims.

Parliament is also considering inserting interpretative principles into the unconscionable conduct provisions of the Australian Consumer Law. These amendments will assist business, the courts and consumers to understand the intention of the Parliament when applying the prohibition against unconscionable conduct.

Mediation services

Where franchisees and franchisors run into problems, they can turn to the Government funded Office of the Franchising Mediation Adviser (OFMA).

Since the beginning of July this year, OFMA has provided free, early intervention dispute resolution services to businesses operating under the Franchising Code.

This service assists parties to:

· address their concerns before becoming entrenched in a dispute;

· maintain a positive commercial relationship; and

· avoid the time, expense and stress associated with formal dispute resolution processes.

OFMA has a mediation success rate of around 75 per cent, indicating the majority of franchisees and franchisors want to work together to achieve commercial success.

Dispute resolution options paper

Earlier this year I released an options paper for public comment on a national service to help resolve small business disputes.

We received around 50 submissions, including a few from the franchising sector.

The submissions are on the Department of Innovation, Industry, Science and Research’s website -

The paper put forward four options.

1. National Information and Referral Service

This would provide a telephone hotline and website directing small businesses to available dispute resolution services and assistance. Callers would be guided through dispute resolution options and then referred to appropriate services in their state or territory.

2. National Dispute Resolution Service

This service would provide information and referrals similar to option one, but also offer mediation where no appropriate low cost dispute resolution service exists.

3. National Small Business Tribunal

A tribunal would specifically deal with small business disputes. It would have the role of investigation and conciliation, backed by Commonwealth legislation. The tribunal would double as a national network and a one?stop shop for small businesses in dispute.

4. Small Business Advocate

The Small Business Advocate would offer independent representation of small business interests and concerns within the Australian Government.

Also on the Innovation website you’ll find a summary of the responses to each of these options.

A common theme among the responses was the need to increase small business awareness of existing disputes resolution services and to collaborate between jurisdictions to promote a consistent, harmonised and coordinated approach.

The feedback also contained warnings against introducing another layer of bureaucracy or diluting those existing systems which are effective.

Role of Small Business Advisory Committee

I have made the point in the past that I am more interested in being a reformer than a regulator - and it’s a passion I pursue as the Minister Assisting on Deregulation.

As part of this process, I am expanding the role of the Small Business Advisory Committee from November 1.

Under the changes, the independent business people on this committee will be able to contribute more of their experience and expertise to help inform the Government’s reform agenda.

The Committee will now advise the Government on emerging small business issues, trends and possible reforms, making it a valuable source of independent information.

We see this as providing for a stronger relationship between the small business sector and the Government.

It is more important than ever that the Government identifies business needs early in the policy development process.

All members of the Committee have a wealth of practical small business skills and experience and a broad knowledge of the economic environment in which small business operates.

I look forward to working with the Committee to identify ways to improve small business productivity, competitiveness and sustainability.


Many of the reforms I’ve touched on today are the result of extensive consultation with industry.

I have always been a strong supporter of such consultation.

I value the response of the many small business groups I deal with and I regard the Franchise Council of Australia as one of the most significant.

I look forward to talking to some of you individually today and at future events where our paths are sure to cross.

Thanks again for the opportunity to address this national convention - and I wish you well in your discussions.