djpr.vic.gov.au · Web viewThe Australian franchise sector makes a very substantial contribution to the Australian economy, and the comprehensive Federal regulatory regime is generally

Submission by the Franchise Council of Australia to Professor Anthony Forsyth in relation to the Ministry

of Industrial Relations Inquiry into the Labour Hire Industry and Insecure Work in Victoria

February 15, 2016

Franchise Council of AustraliaLevel 1

307 Wattletree RoadMalvern East

Victoria 3145

Stephen GilesDirector – Government Relations

1300 669 [email protected]

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Victorian Labour Hire Inquiry - Submission by the Franchise Council of Australia – February 15, 2016 2

Executive SummaryThe Franchise Council of Australia (FCA) is the peak industry body for the franchise sector. It represents franchisors and franchisees as well as service providers and suppliers that are involved in franchising. The FCA welcomes the opportunity to provide input into this Inquiry.

The Australian franchise sector makes a very substantial contribution to the Australian economy, and the comprehensive Federal regulatory regime is generally regarded as working effectively. An extensive review was conducted by Mr Alan Wein in 2013, and his Report (Wein Report) noted that the Australian franchise sector operates well, and the Franchising Code of Conduct (Code) is “a robust model” which “generally operates effectively within a very dynamic and difficult economic environment.” 1 The Report noted that the level of complaint and disputation in the sector were relatively low. The Wein Report received bi-partisan support and the support of various State Governments that had looked into the regulation of franchising. Following the Wein Report, a series of further improvements to the Code (all incidentally supported by the FCA) were introduced with effect from 1 January, 2015.

In our verbal evidence to the Inquiry we provided background information concerning the nature of the franchise relationship, as well as an explanation of how the separation of responsibilities between franchisor and franchisee are at the core of the competitive advantage the franchise model provides to small business. The fact that franchisors and franchisee are each able to focus on different business activities essentially ensures that small businesses can compete effectively against large corporations. If legislation were to be introduced that somehow artificially combined responsibilities, such as under a joint employment concept, this would strike at the heart of the competitive advantage and unnecessarily benefit big business.

The Inquiry has called for our comments in relation to two specific key policy issues. We confirm that:-

1 The FCA opposes any extension to make franchisors somehow liable for the workplace compliance obligations of franchisees. The separation of responsibilities between franchisor and franchisee goes to the heart of the franchise model. This separation in a workplace context is for efficiency purposes, and is not to prejudice the rights of workers or avoid workplace responsibilities. Further, the current accessorial liability provisions amply cover a situation where a franchisor is actively involved in a breach of the law by a franchisee; and

2 The FCA opposes any State regulation of franchising. The existing comprehensive Federal regulatory regime is world’s best practice, has only recently been the subject of comprehensive review and is working well. Not only did the comprehensive Wein Report into the franchise sector in 2013 (and numerous previous inquiries) recommend against regulating a national activity such as franchising at a State level, but the Productivity Commission has also produced material that clearly concludes that small business is particularly vulnerable to the substantial and unnecessary cost of regulatory duplication.

Unilateral action by the Victorian Government on either front would prejudice Victorian based franchisors and franchisees, and see investment diverted to other States.

We have provided further information in support of our position in the body of this submission. We have also provided at Annexure A a copy of our submission to the Senate Standing Committee deliberations concerning temporary work visas (Senate Submission). As some of the matters under consideration by the Inquiry overlap with the issues under consideration by the Senate Committee we direct you to the detail of the Senate Submission as we have not replicated our comments on those matters in this submission.

This submission provides the information and input to the Inquiry that includes:-1 Letter from Alan Wein 30 April 2013 to the Minister and Parliamentary Secretary, Wein Report, page i.

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• Detail on the size, importance, economic contribution and diversity of Australian franchising, and the fact that franchised businesses account for a disproportionately high proportion of the economic output of the Australian small business sector.

• Clarification that franchising is a way of conducting business, and is not an industry sector itself. Franchised businesses range from large retail outlets to mobile or service businesses, and can be seen in almost every industry sector. Similarly in most sectors franchised businesses compete against non-franchised businesses, and must not be put at a competitive disadvantage due to inappropriate regulation just because franchised businesses tend to be more easily identified as brands due to their success.

• An explanation of the economic importance of maintaining the separation of responsibilities between franchisors and franchisees, as this is the essence of the symbiotic relationship that allows independent small businesses to focus on different parts of the overall process that delivers a good or service to a customer.

• Details of the current regulatory framework that enables Australia to fairly claim it has the most comprehensive regulation of franchising anywhere in the world. The FCA is a strong supporter of the current comprehensive Federal regulatory framework, and vigorously opposes any form of State based regulation of franchising.

• Reasoning to support our opposition to State based regulation of franchising, including details of surveys conducted at the time of proposed South Australian legislation illustrating that virtually all franchise systems opposed State based regulation of franchising and would review their investment decisions should a rogue State seek to introduce such laws.

• Details of the features of the 7-Eleven business model that make it dramatically different to all other franchise models. The extent to which 7-Eleven becomes involved in the business of the franchisee, including workplace matters, is atypical of the normal franchise model. 7-Eleven is also a large corporation, whereas 95% of Australian franchisors are small businesses.

• Reasons why the FCA opposes the introduction of legislation to make franchisors liable for the workplace breaches of franchisees, noting that the FCA supports the current accessorial liability regime under Federal law and has made additional recommendations to the Senate Committee.

We commend the detail of this submission for your consideration, and would be pleased to provide any further information or comments to assist the Inquiry.

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The contribution of franchising to the Australian economy

The franchise sector has been a major contributor to the Australian economy, with most recent statistics2 indicating annual industry turnover of in excess of $144 billion. There are approximately 1,160 different franchise networks with a total of 79,000 franchised outlets employing in excess of 460,000 people.

Franchising enables small businesses to compete effectively against major corporations, and indeed the franchise model is probably the only proven business model that provides ongoing competitive advantage to franchisors and franchisees alike. Franchised businesses are often market leaders in their industry – McDonald’s and Domino’s; Baker’s Delight and Brumby’s; Forty Winks and Snooze; Jim’s Mowing and VIP are examples. All of these businesses compete against major corporations in their industry sectors, and it is vital to Australian consumers that they are not hamstrung by inappropriate legislation, regulatory duplication or red tape.

As 95% of franchisors, and almost all franchisees, are small businesses, the sector is particularly sensitive to the cost of regulation. A list of members of the FCA is included in Annexure B to demonstrate the breadth and diversity of the franchise sector. Great care needs to be taken in drafting franchise legislation to cater for the business diversity – from low-cost mobile and service franchises to product distribution arrangements to complex and prescriptive retail business format franchises, and across a multitude of industries.

Similarly, as the key assets of most franchisors and franchisees are intangible (for example, intellectual property and goodwill), the sector is vulnerable to the impact of litigation. Australia has learnt from the US and Canada, and instigated mediation as the cornerstone of dispute resolution. Mediation has been a great success, and has fostered a collaborative approach to dispute resolution between franchisees and franchisors. Any attempt to create a more adversarial environment, or any new legal remedies that encourage opportunistic plaintiff law firms to enter the sector, must be resisted.

The FCA is committed to working collaboratively with Government to ensure we have an effective and efficient regulatory framework. To this end, the FCA has provided submissions in relation to all recent inquiries into franchising (both at a State and Federal level), as well as comments in relation to issues relevant to the sector, such as the proposed Australian Consumer Law (ACL). Many of the FCA’s suggestions have been implemented by Government. The FCA supported the introduction of the Code in 1998, and also supported the Code amendments made in 2007, 2010 and 2015.

The collective input and wisdom of those involved in previous reviews and inquiries have created our current regulatory environment, which the FCA believes fairly balances the interests of franchisors and franchisees in this dynamic industry sector where almost all participants are small businesses.3

It is critical that any legislative reforms are based on careful analysis of evidence and proper process, and are not introduced simply to appease particular individuals or organizations. The Franchising Australia 2012 Survey confirmed the relatively low levels of disputation in the sector, and the Spring 2012 PricewaterhouseCoopers Franchise Sector Indicator confirmed that the franchise sector continued to outperform the general economy notwithstanding relatively difficult economic times. Further, ACCC complaints and disputes where a mediator is appointed by the Office of Franchise Mediator, consistently remain at low levels.4

2 Griffith University Franchising Australia survey 20143 The FCA estimates that around 95% of franchisors, and virtually 100% of franchisees, are small businesses for the purposes of the typical Government definition. Small business is highly sensitive to the financial impact of regulation.4Between 1-2% of franchisees have had a dispute with their franchisor according to the Franchisng Australia surveys. Of this small proportion an even smaller percentage are involved in formal dispute resolution proceedings. The vast majority of franchising disputes are resolved via mediation, with the Office of Franchise Mediation Advisor reporting a success rate of over 80% in the mediations with which it is involved.

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From time to time further regulatory enhancements come to light. The FCA’s view is that if there is a concern, the concern should be addressed by specific amendments to the Code, rather than by ad hoc State intervention. There are already catch all prohibitions for misleading or deceptive conduct and unconscionable conduct in the Competition and Consumer Act 2010 (Cth) (CCA). The FCA has supported improvements to disclosure as this is consistent with the policy framework for the Code, which supports rather than overrides the contractual process. The most recent example is the 2015 amendments to the Code and allied reforms which among other improvements have included a specific good faith obligation, new penalties for breach of the Code and stronger enforcement powers for the ACCC.

As franchised brands typically punch well above their weight in terms of profile and brand recognition they can sometimes be more visible that other businesses. Where there are industry challenges it is important to focus on the whole industry, not just the visible brands, as this would discriminate against franchised brands notwithstanding that they are typically more compliant. Similarly it is important to recognise the difference between an industry issue – that applies to an industry, such as convenience stores, or plumbing, or motor vehicle retail – and the franchise sector, which cuts horizontally across all industries.

The recent issues associated with temporary work visas are a good example of both situations. Although 7-Eleven has borne the brunt of all allegations as it is a major brand there is no doubt that there are very many non-franchised businesses that operate with the protection of relative brand anonymity. Regulators need to ensure they enforce the law without fear or favour across all relevant industries and irrespective of the brand profile of the business. Similarly the problems in the 7-Eleven network were not franchising issues, but related to the 24 hour convenience store industry. It would be wrong to tarnish the franchise sector for a convenience industry issue.

Franchising is typically a force for good when it comes to compliance, so it would be wrong to single out franchising for special legislative attention. The nature of the relationship means that there are strong systems, franchisor income is often dependent on the accuracy of franchisee record keeping and the small business franchisees benefit from initial and ongoing training and support beyond what would be available to an non-franchised small business. This fact has been recognised by bodies such as the Australian Taxation Office and Fair Work Australia, who through the FCA have been able to introduce a number of initiatives aimed at enhancing the levels of education and compliance. This cooperation is continuing, and has been well received by the franchise sector.

On the other hand one does not need to travel far in one’s daily routine to discover non-franchised businesses where the cash economy flourishes, GST payments are ignored, OH&S and workplace compliance is likely to be problematic and one suspects record keeping is minimal. Although it is not the role of the FCA to serve as a whistle blower on such businesses it is a cause of significant frustration to our members that compliance activities and media attention does not focus more closely on these businesses. The FCA has advocated providing additional resources for Fair Work Australia to ensure that compliance activities are conducted effectively, and across the board.

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Understanding franchisingThe main focus of the Inquiry is labour hire companies and insecure work. The franchise sector does not use labour hire companies, and to the FCA’s knowledge no labour hire company is a member of the FCA. Similarly the franchise sector provides safe and secure work opportunities for over 460,000 Australians, and so is not logically a focus for the Inquiry’s more general deliberations. However recent media publicity concerning serious workplace breaches by a number of 7-Eleven franchisees, and justified community concern in relation to exploitation of individuals on temporary work visas, makes it important for the FCA to contribute information and facts to assist the Inquiry in its deliberations.

More broadly, the FCA always seeks to ensure that the Government has a clear understanding of the very positive contribution made by the Australian franchise sector to economic output, employment, training and education, multi-cultural diversity and to the fabric of metropolitan and regional communities. The franchise model is almost the only model that enables small business to compete effectively against large corporations. It is vital that this entrepreneurial small business sector is protected against unnecessary regulation, bureaucracy and red tape.

As noted above, the FCA is the peak industry body for the franchise sector, representing around 700 franchisors, franchisees, service providers and suppliers involved in franchising. A list of members of the FCA is attached as Annexure B to help illustrate the size and diversity of the Australian franchise sector.

As you can see from some of the brands listed, franchising is a business model that takes various shapes and forms and cuts across almost all industry sectors – from motor vehicle dealerships to lawn mowing; from finance broking to gutter cleaning; from speciality retail to home services; from bakeries to health spas; from haircare to dog grooming; from chicken shops to pharmacies; from convenience stores to mobile knife sharpening and from sophisticated business formats to cooperatives and buying groups.

When most people think of franchising they may think of McDonalds or Jim’s Mowing, but there are over 1,100 different business models and around 79,000 independently run small businesses. In simplified terms all it takes to constitute a franchise agreement between 2 independent business owners is and agreement where:-

• a party (franchisee) is given the right to carry on business under another party’s (franchisor) trade mark or logo;

• the franchisee party is required to comply with some form of system or marketing plan for some or all of their business; and

• there is a payment flowing (other than for stock or equipment or services at normal prices) from franchisee to franchisor.

So the definition is extremely broad, and catches most types of distribution networks.

Importantly, almost all franchise systems listed are small businesses. Further, 75% of all franchised networks have fewer than 25 franchisees. So the franchise sector is fundamentally a small business sector, and as the Productivity Commission and various small business inquiries have noted is particularly vulnerable to red tape and over-regulation.

The essence of the franchise business model is that two independent businesses – that run by the franchisor, and that run by the franchisee – work separately but collaboratively to deliver a good or service to consumers. The franchisor typically will focus on things like strategy, brand development, group purchasing, network growth and group marketing. The franchisee will usually focus on the interface with the customer and the day to day operation of the business. Having day to day business responsibility means the franchisee will typically be the employer of all staff in the store or retail

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business, and the franchisor will be the employer of head office staff. (As a matter of interest the average number of head office staff is around 6 – 8 people, which is quite a small number. However some franchisors will have quite a large number of staff. So even in this context there are quite wide variations between franchise systems.)

The businesses are very separate. Just as the franchisees do not know from day to day what the franchisor is doing, but just expect an end outcome as per the franchise agreement, the franchisor will typically not know on a day to day basis what specifically the franchisee is doing. Again the franchisor has an expected outcome, but the two businesses are very separate5. The separation of responsibilities is central to the efficiencies – each party does what they do best, and there is no duplication of endeavour.

Franchisors of course have a vested interest in the activities of franchisees, and vice versa. So most franchise agreements will contain a provision to the effect that a franchisee must comply with all laws, including laws relating to workplace relations. The potential brand damage (no better illustrated than with the recent 7-Eleven situation) means franchisors will be keen to ensure franchisees do nothing to tarnish the brand in discharging their day to day obligations. However the vast majority of franchisors do not have the time, money or people resources to do more than provide access to information, some initial and ongoing training and support as required, and to take action as appropriate when problems arise.

If any change is made to workplace laws to make franchisors jointly liable for the workplace default of the franchisee employers this is in our opinion likely to reduce compliance, not enhance it. Currently the position is crystal clear – if a franchisee defaults in its workplace obligations, the breach is clearly the franchisee’s sole responsibility and the franchisee’s franchise agreement is at risk if any breach occurs. Joint liability will blur that clear distinction, open up opportunities for abuse and make it more difficult for franchisor’s to enforce compliance requirements. A much better solution is to agree on an franchise sector standard for franchisors and franchisees in the context of securing enhanced workplace compliance and protecting the interests of workers. The FCA is actively working with Fair Work Australia, the Fair Work Ombudsman and others in the franchise sector to finalise such a standard, which will essentially preserve the competitive advantages of the franchise model and simply set out the respective expectations of the franchisor and franchisee in the context of workplace compliance.

A draft of the Standard is attached in Annexure C. You will see that the Standard imposes obligations on the franchisor consistent with the systems and support obligations willingly accepted by most franchisors, but retains the important separation between these obligations and the obligations that flow under law to employers. Those obligations should remain with the employer, being the franchisee in relation to staff employed in the retail or service business. (Of course further protection under the accessorial liability provisions of the Fair Work legislation is already provided for franchisors that overstep the mark and become genuinely involved as joint employers or accessories. This protection is appropriate, and should remain as it applies to all businesses – franchised and non-franchised.)

5 (7-Eleven is of course an exception to this general rule as they run a unique and quite highly integrated business model that includes paying all business suppliers and offering a payroll service whereby they actually pay all employees of the franchisees on behalf of the franchisees.)

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The regulation of franchisingBackground

The current Federal regulatory framework for franchising is clearly best practice when compared to other regulatory regimes around the world. As mentioned, the regulatory framework includes the Code, which was amended with effect from January 1, 2015 after a comprehensive review by Mr Alan Wein. Included in the 2015 amendments to the Code (and the consequential amendments to the CCA in relation to penalties and enforcement powers) where a new good faith obligation, pecuniary penalties for breaches of the Code and stronger enforcement powers for the ACCC.

Importantly the regulatory framework also includes the prohibitions on misleading or deceptive conduct and unconscionable conduct contained in the CCA, which have wide potential application to franchising. This framework will be strengthened even further by the recently announced amendments to the CCA to prohibit unfair contract terms in standard form small business contracts, which will apply to most franchise agreements. The oversight of the sector by the Australian Competition and Consumer Commission (ACCC), arguably Australia’s best resourced and most effective regulator, has recently been supplemented by the appointment of Federal and State Small Business Commissioners. This comprehensive framework supports, but does not unreasonably interfere with, the fundamental principles of contract law that underpin business dealings throughout the Western world.

There is no more comprehensive regulatory environment for franchising anywhere in the world. Further, there is simply no need or scope for any further regulation of franchising, let alone State based regulation. This is not only our view, but the firm view of Alan Wein in his report on regulation of the franchise sector in 2013. Indeed one of the main purposes of the Wein review was to obviate the alleged need for other States to follow the threat of South Australia and introduce State based regulation to address the alleged deficiencies of the system at that pint – the lack of a good faith obligation in the Code, and lack of penalties for non-compliance. Both of these alleged deficiencies were remedied with the 2015 amendments to the Code. As most franchise systems operate across State boundaries the franchise sector is a strong supporter or the current comprehensive Federal regulatory framework, and vigorously opposes any form of State based regulation of franchising.

A key element of the regulatory framework is the mediation based dispute resolution framework. Once the process is activated by a party to a franchise agreement, the other party must participate in mediation. The Office of Franchise Mediation Australia (OFMA) reports that approximately 80% of all disputes notified to OFMA are resolved to the satisfaction of the parties, which is a stunning and low cost outcome. State Small Business Commissioners also involve themselves in the mediation process, with the most successful example being the lauded Victorian system where there is a subsidized cost such that the parties can mediate a dispute for around $250 each – an incredibly low figure when considered against the cost of litigation or indeed any other means of dispute resolution.

Specific compliance requirements

The regulatory regime for franchising is conceptually similar to that which applies globally in franchising, as well as in leasing and other commercial relationships involving independent business owners. It honours the fundamental principle of freedom of contract that underpins commerce throughout the Western world, but provides important enhancements:-

1 The Code processes to ensure that all parties are free to contract without pressure or undue influence, notably the 14 day hiatus period from provision of disclosure before a franchise agreement can be signed, and the 7 day cooling off period;

2 The Code disclosure requirements that ensure each party has access to relevant information in the possession of the other party. A disclosure document prepared and provided in accordance with the Code’s requirements contains extensive information about almost every conceivable

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aspect of the franchise, the franchisor and the franchise agreement including business set up and operating costs and financial information concerning the franchisor;

3 Information is included in the disclosure document to enable prospective franchisees to contact existing and former franchisees, and in the mandatory content on page 1 of each disclosure document it is recommended to franchisees that they make such enquiries;

4 The Code requirement to update material information if it changes, and advise franchisees, and to at least update information annually;

5 The new Code requirement for parties to a franchise arrangement to act in good faith;

6 The CCA prohibitions on false, misleading or deceptive conduct including misleading representations as to the revenue, profit or likely success of the franchised business. In a relationship such as a franchise the duty to avoid misleading conduct is likely to include a positive duty to avoid remaining silent if a franchisor is aware of material information relevant to the franchise;

7 a CCA prohibition on unconscionable conduct; and

8 specific Code provisions that regulate the types of provisions that can be included in the franchise contract in key areas such as transfer, termination, waivers and dispute resolution.

The Code goes further, establishing additional processes to attempt to ensure a prospective franchisee makes a fully informed decision. As soon as possible after a franchisee expresses an interest in acquiring a franchise, a franchisor must give an Information Statement to a prospective franchisee in a prescribed form, which sets out the general risks and rewards of becoming a franchisee. There are warnings in the mandatory content on page 1 of each disclosure document about the nature of franchising, and some of the risks. Prospective franchisees are urged by the Code to obtain, and franchisors must recommend that they obtain, legal and business advice, and a certification process supports this requirement.

The regulatory framework works well

The regulatory framework is built on two fundamental principles: responsible franchisor behaviour; and effective franchisee due diligence. The Code supports these two principles. Indeed the Code regime is arguably foolproof if it is followed by franchisors and franchisees.

The evidence clearly demonstrates that the current regulatory framework is working well. The Franchising Australia Surveys in 2012 and 2014 confirmed the relatively low levels of disputation in the sector, and the Spring 2012 PricewaterhouseCoopers Franchise Sector Indicator confirmed that the franchise sector continued to outperform the general economy notwithstanding relatively difficult economic times. ACCC complaints, and disputes where a mediator is appointed by the Office of Franchise Mediator, remain at low levels fairly consistently.

These conclusions are consistent with the results were obtained in a survey conducted by the Griffith University Asia-Pacific Centre for Franchising Excellence Report, entitled Survival of the fittest: The performance of franchised versus independent small business during economic uncertainty and recovery (Survival of the Fittest Report). The University surveyed franchisees and independent businesses, and compared the two. It also compared successful franchisees with failed franchisees. The comparison with independent operators reinforces that franchisees are already substantially better off, and de-bunked some of the myths around the fairness of franchise agreements.

“Most franchisee experts reported that potential franchisees were provided with more information than would be available to independent operators. In particular, most suggested that franchising was more transparent, and provided more detailed information to potential entrants as it had a structure behind it.”

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“Most successful franchisees considered the franchise agreement to be “both fair and equitable” and “franchising matched their expectations”, whereas struggling or exited franchisees felt the franchise agreement “did not provide a true representation of what was expected.” “However in the context of shopping centre leases a different picture emerges…” “All interviewees expressed concern in terms of the nature of shopping centre lease agreements and the propensity for landlords to act unethically in increasing rent requirements.”

The survey found that 84% of surviving franchisees as well as 80% of failed franchisees felt that there was enough information given to them to make an informed decision about buying my franchise.

The feedback from failed franchisees, already identified in the Survival of the Fittest Report as being a group more likely to blame others, was particularly insightful. Only 28% of failed franchisees wished there was more information. Furthermore, even failed franchisees rated information given as very relevant (85%), very accurate (80%), very complete (77%) and very helpful (85%). The vast majority of failed franchisees also reported that they fully understood their obligations in the franchise agreement (85%) and felt them to be fair and equitable (84%). The percentages for successful franchisees were very similar, and indeed (as you would expect) even slightly higher.

Based on the above, we can clearly see that the disclosure and pre-contractual process set out in the Code is working as intended.

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State based regulation of franchising

Although the FCA welcomes the interest shown by the Victorian Government in franchising, and is appreciative of the opportunity to discuss franchising issues with the Inquiry, the FCA is strongly supportive of the regulation of franchising solely at a national level and strongly opposed to any State based regulation.

Our whole sector supports a solely Federal regulatory framework, with a survey of members taken in the context of proposed Western Australian franchise legislation in 2010 showing that 95% of members disagreed with the concept of State regulation of franchising. Indeed 90% of respondents said they would review their investment decisions in WA should State based legislation be passed, and a number of franchise systems publicly warned that they would move their headquarters out of the State should legislation be passed. In our view the franchise sector would adopt the same view if any State threatened to introduce State based legislation concerning franchising.

Common sense ultimately prevailed in WA in 2010. A report into franchising by Christopher Bothams commissioned by the WA Government 2 years earlier had come to the conclusion that whilst some improvements could be made to the current legislation, the appropriate way to achieve this was via amendments to the Federal legislation. The Western Australian Government determined in 2010 not to proceed with State based regulation, then assisted the Federal government frame its proposed changes to the Federal regulatory regime that took place in 2010 and 2015.

This is consistent with the national approach confirmed by Council of Australian Governments in 2008. It is totally inappropriate to introduce State legislation to regulate franchising. There are no issues in franchising in Victoria that are unique to the Victorian market. Most franchise systems operate, or at the very least intend to operate, across State boundaries. State regulation of franchising would create unnecessary duplication and cost at a time when all Governments are championing a reduction in regulatory red tape.

As mentioned, over 95% of franchisors are small businesses, and they have limited capacity to absorb the costs of excessive regulation. On this point, we note that the costs of regulatory duplication have been independently recognised quite recently. In 2010 the Productivity Commission released a report that estimated that the concurrent regulation of consumer affairs at Federal and State level cost an estimated $4.9 billion above the cost of a unified Federal scheme. The franchise sector cannot afford even a fraction of this additional cost, and the FCA and its members would strongly resist any attempt to regulate at a State level given the existence of the current Federal regime.

It is also useful to consider the US experience, where they do have concurrent Federal and State regulation. According to the International Franchise Association the consequence of inappropriate State legislation is not only substantial extra compliance cost, but often that franchise systems simply withdraw from business activities in that State. For example the damage to the State of Iowa due to the introduction of its franchise legislation has been significant, with 135 companies reducing or halting expansion in Iowa, with a consequent cost of $207 million in lost sales and 7,500 jobs. 27 US States have since rejected Iowa type laws, and the legislation has been broadly condemned.

Perhaps the last word should go to Mr Alan Wein, who made specific reference in his 211 page report in 2013 to regulatory overload, noting “it has been a clear and consistent message during consultations that, following the outcomes of this review process, there should be a moratorium of sorts on further reviews of the Code.”6 Accordingly he recommended that “there should not be another review of the Code for a minimum of five years after any amendments to the Code take effect.”7 He also noted that submissions to the review were overwhelming in their support for the retention of a single, national regulatory scheme, commenting that “evidence clearly indicates that a national system reduces

6 Wein Report p 167.7 Recommendation 17, p167.

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duplication, red tape, uncertainty, compliance costs and ensures franchisors are in the best position to develop and maintain an effective national business model”.

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Franchising and the 7-Eleven model

Franchising has been phenomenally successful in Australia, and indeed it has been suggested that the franchise model is probably the only way for small business to band together to compete effectively against large corporations. Franchising therefore performs a very important function in the Australian economy. Franchise models vary from the very sophisticated (for example McDonald’s) to cooperatives where the franchisor is in fact owned by the franchisees, and simply serves as a vehicle to pool marketing and purchasing efforts.

Even in the highly diverse franchise sector, and compared against the most sophisticated franchise models, the 7-Eleven model stands alone. It involves quite unique features, notably:-

• 7-Eleven and the franchisees are essentially joint venture partners in the franchisee’s business, rather than entirely independent businesses;

• 7-Eleven provides franchisees with a comprehensive day to day business model that includes not only comprehensive business services, mandated stock range and mix, automatic stock supply and replenishment and the payment of all invoices on behalf of the franchisee, but the provision of an optional payroll service that actually pays all of the franchisee’s employees. The FCA is not aware of any other franchise system that pays the wages of employees of franchisees;

• The 7-Eleven financial model operates on a split of gross profit, rather than the typical model where the franchisee pays either a variable or fixed fee for use of the brand and system and sometimes certain services. And of course some franchise systems charge no fees at all, just a margin on product supplied.

It is also worth noting that 7-Eleven is also a very large corporation, with a very large network of hundreds of franchise owners. By contrast around 95% of other franchise systems have fewer than 25 franchisees, with average head office staff of around 6-8 people.

The vast majority of franchise systems are better seen as a network of independent businesses united under a common brand. Most franchises are structured to celebrate and support the independent nature of the individual franchisees, with the business owner operating the business within the support network of product, deals, training and profile provided by the franchisor. Few if any franchisors would have the staff or resources to provide any input into workplace issues at franchisee level – this separation of responsibilities is the essence of franchising that enables the franchisees to focus on the franchised businesses, and the franchisor to focus on branding, systems, group purchasing, group marketing and network development.

An understanding as to how franchising typically operates enables policy makers to distinguish franchising from outsourced arrangements that create opportunities for exploitation. The FCA appreciates that the workplace abuses by several 7-Eleven franchisees in the context of a highly prescriptive joint venture business model can make franchising seem closer to labour outsourcing arrangements that are the main focus of the Inquiry’s deliberations.

However even in the 7-Eleven model, and despite the media focus on the brand and the inattention 7-Eleven appears to have given to monitoring franchisee input to the payroll system, there is a clear and well understood delineation of responsibilities in relation to workplace matters. The franchisee is clearly responsible as employer for all workplace obligations, and the workplace abuses occurred solely at the initiation of the franchisees. Indeed the franchisees appear to have been very sophisticated in their efforts to deceive 7-Eleven, submitting deliberately falsified records and otherwise manipulating the payroll system.

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It is not our intention to comment on behalf 7-Eleven, but as an observer it does seem that there is now clear evidence that the franchisees chose to breach the workplace obligations notwithstanding that there were adequate funds within the franchisee’s business to enable appropriate wages to be paid. Even in the 7-Eleven case it cannot fairly be said that the business arrangement is somehow a sham, designed to avoid workplace obligations or provide an insecure work environment for employees.

In franchising more broadly the separation of responsibilities between franchisor and franchisee is for efficiency, focus and competitive advantage of the franchisee and franchisor. It is simply not possible to rationally argue that typical franchise arrangements come even close to being a sham, or are designed to avoid workplace obligations or provide an insecure work environment for employees. Indeed the franchise model enhances the chance of success for small business, thereby providing greater job security.

Fair Work Australia and the Fair Work Ombudsman will also attest to the proactive manner in which the franchise sector has engaged with them to promote workplace laws and enhance levels of workplace compliance. As with other regulatory areas such as taxation and competition and consumer laws the franchise sector is typically highly compliant. This is largely driven by two factors:-

1 Systems and record keeping being central to the franchise model, including the manner of calculation of franchisor royalties and other fees. So compliance is built in to the franchise model; and

2 The potential brand damage, with ramifications for the franchisor and other franchisees, if a franchisee fails to comply with the law. (The brand damage is graphically illustrated by the recent media publicity surrounding the 7-Eleven network.)

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Annexure A - Submission to the Senate Committee – September 2015

Submission by the Franchise Council of Australia to the Senate Standing Committee on Education and Employment in relation to the impact of Australia's temporary work visa programs on the Australian

labour market and on the temporary work visa holders.

September 2015

Franchise Council of AustraliaLevel 1, 307 Wattletree Road,Malvern East, Victoria 3145

1300 669 030

Contacts:[email protected]

[email protected]

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1. Introduction

The Franchise Council of Australia welcomes the opportunity to contribute to the deliberations of the Senate Standing Committee on Education and Employment, and its consideration of the impact of Australia's temporary work visa programs on the Australian labour market and on the temporary work visa holders.

The Franchise Council of Australia is the peak industry body for the Australian franchise sector. Although many aspects of the deliberations of the Senate Committee are only of general relevance to the franchise sector, the FCA has taken a keen interest in recent deliberations as an observer as a consequence of some references to franchising more broadly due to focus on the 7-Eleven organisation.

A key role of the FCA is to promote best practice in Australian franchising and we have and will continue to work closely with Government and authorities, including Fair Work Australia to this end. This submission contains some analysis and suggestions that we hope will assist the Committee in its deliberations. Franchising is the backbone of Australia’s small business community, providing a framework for independently owned and operated small businesses right across the nation. While the 7-Eleven model is unusual and contains a number of unique features, we are, of course, following the Committee’s proceedings closely to identify any learnings for the broader sector.

Given the unusual nature of the 7-Eleven model, we are keen to ensure that any regulatory responses recommended by the Committee are appropriate, and do not impede or prejudice the broader franchise sector or impose unnecessary compliance costs.

KEY POINTS:

1. 7-Eleven’s approach of a comprehensive day to day business model including the payment of all invoices on behalf of the franchisee, provision of a payroll service, and a financial model that operates on a split of gross profit, is not typical of a franchise network. Most franchises are structured to celebrate and support the independent nature of the individual franchisees with the business owner operating the business independently within the support network of product, deals, training and profile provided by the franchisor.

2. It is not currently possible under the Franchising Code of Conduct to terminate a franchise agreement even in the event of serious breach of workplace obligations by a franchisee. The FCA’s recommendation is to amend the Code of Conduct to permit a franchisor to immediately terminate a franchise agreement if a franchisee commits a serious breach of its obligations under any workplace legislation.

3. The FCA enjoys an excellent relationship with Fair Work Australia and the Fair Work Ombudsman, and has a long and proud track record of proactively helping these bodies implement a number of initiatives to enhance knowledge and promote compliance. We support the extension of powers and additional resourcing of Fair Work Australia and the Fair Work Ombudsman that appears to be required to enhance compliance across all businesses, particularly small businesses.

4. It seems that the in camera evidence largely relates to the specific instances of abuse rather than policy issues.

2. The importance of the Australian Franchising Sector

There are approximately 1180 business format franchise systems in Australia, with an estimated 73,000 outlets turning over $131 billion, and employing more than 600,000 people8. 95% of franchisors and almost all franchisees fall within the definition of “small business” and our members represent the backbone of independently owned and operated small businesses right across Australia.

Our members are market leaders in many industry sectors notwithstanding the fact that they have to compete with large corporations. Automotive retail, bakeries, casual dining, fast food, coffee shops, convenience stores, real estate, tyre retail, bedding, furniture retail, postal services and home services are just a few sectors which FCA Members provide valuable services in.

8 Franchising Australia Survey

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Franchised business typically outperform non-franchised businesses (and indeed major corporate chains) in every market economy because of the synergistic relationship between franchisor and franchisee. This synergistic relationship is structural - franchisor and franchisee work collaboratively to achieve a mutually beneficial outcome and deliver the customer promise, but they do so by taking on clearly-defined, separate tasks. This structure accommodates and supports the independence of the small business operator while providing the support and profiling benefits that flow from being part of a franchise brand.

Typical Franchisor-Franchisee Responsibility split

While there is a diversity of business structure given the range of sectors involved, typically the franchisor will focus on the brand, the development and enhancement of the common franchise system used across the network, as well as product supply and the bigger picture issues. The independently-owned and operated franchisee will focus on day to day operations, including appointing and managing employees. Just as the franchisee does not get involved in the franchisor’s activities, the franchisor does not get involved in the franchisee’s activities.

Franchising and employment

In the case of employment matters, given the independent nature of the franchisee’s business, it is predominantly the franchisee’s responsibility to seek, appoint, train, pay and manage all staff, and meet all workplace obligations. As good corporate citizens, most franchise systems also disseminate information on compliance with employment laws to franchisees, including material provided by Fair Work Australia. They will also include content in training programs.

It is also important to note that the Franchising Code of Conduct currently restricts the action franchisors can take against franchisees in the event of non-compliance. As was stated in evidence to the Committee by Dr Tess Hardy, 7-Eleven representatives and others it is not currently possible under the Code to terminate a franchise agreement even in the event of serious breach of workplace obligations by a franchisee. A franchisor can only serve a notice of breach, which then allows a franchisee an opportunity (usually within 30 days) to remedy the breach. Remedial action by a franchisee such as providing an undertaking not to re-offend, compensating prejudiced employees and attending refresher training would prevent termination.9 You will note the FCA’s recommendation to amend the Franchising Code of Conduct to permit a franchisor to immediately terminate a franchise agreement if a franchisee commits a serious breach of its obligations under any workplace legislation.

The unusual nature of the 7-Eleven network

When we observed the Committee’s deliberations it did seem that there may be some misconceptions in relation to the typical franchise arrangement, and the rights and responsibilities of franchisor and franchisee under a franchise agreement and at law under the Franchising Code of Conduct. Given the focus on 7-Eleven, we wish to stress the atypical nature of the 7-Eleven structure.

7-Eleven’s approach of a comprehensive day to day business model including the payment of all invoices on behalf of the franchisee, provision of a payroll service, and a financial model that operates on a split of gross profit, is not typical of a franchise network. Most franchises are structured to celebrate and support the independent nature of the individual franchisees with the business owner operating the business within the support network of product, deals, training and profile provided by the franchisor.

Franchising and Fair Work Australia / The Fair Work Ombudsman

The FCA enjoys an excellent relationship with Fair Work Australia and the Fair Work Ombudsman, and has a long and proud track record of proactively helping these bodies implement a number of initiatives to enhance knowledge and promote compliance. Fair Work Australia and the Fair Work Ombudsman understand the dynamics, and the typical split of responsibilities, between franchisor and franchisee. We are keen to continue to work with them to promote compliance, and ensure the franchise sector delivers fair outcomes to workers.

Our members have embraced the voluntary Fair Work initiatives, and remain keen to continue to work with the regulators to assist them to meet their investigation and enforcement obligations. You will note in this submission that we support the extension of powers and additional resourcing of Fair Work Australia and the Fair Work

9 See clause 27 (termination for breach) and clause 29 (termination – special circumstances) of the Franchising code of Conduct.

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Ombudsman that appears to be required to enhance compliance across all businesses, particularly small businesses.

We will also be consulting with the regulators as to our additional suggestions in the hope of coming up with a shared view. We believe we all share a common objective, and are confident an industry solution will produce the best outcome for all.

3. The temporary work program

Background

The Franchise Council of Australia does not hold a definitive view in relation to the current temporary work program. The franchisors and franchisees we represent will seek to utilise whatever Government programs are in place that provide access to potential business owners and employees. We will defer to others as to whether the current program is effective, or could be improved. In terms of a general viewpoint, the FCA’s position is generally aligned to that contained in the submission from the Australian Chamber of Commerce and Industry.

As noted above, the FCA has taken an interest in the more recent deliberations of the Committee in the context of the 7-Eleven organisation. The 7-Eleven organisation is not a small business, and the 7-Eleven business model is very different to the typical franchise model. The instances of employee abuse provided to the Committee are indefensible if proven, and 7-Eleven has presented to the Committee on its intended response to these issues. The FCA does not seek to intervene in relation to those specific matters.

Appropriate solutions

In this submission we have provided some suggestions for the consideration of the Committee after considering the content of the various submissions made, and the deliberations of the Committee to date. These suggestions are intended to address the legitimate concerns identified by the Committee and in submissions, but to do so in a way that avoids unintended damage to the broader franchise sector or unreasonable additional compliance cost to small business.

The FCA appreciates the opportunity to provide this input into the formulation of policy, and the development of a workable and constructive implementation framework. We would welcome the opportunity to discuss this submission with the Committee in further detail.

Although the specific detail and extent of the unfortunate events involving the 7-Eleven organisation are yet to be fully determined it is clear that a number of indefensible instances of exploitation have occurred. No doubt the Committee and others will continue to pursue these matters, and seek further explanations and information from all involved.

The purpose of this submission is to provide a somewhat objective assessment of the market place reality of the guest worker program in the context of small business, and make some suggestions for regulatory reform. This submission takes into consideration all submissions made to the Committee, and the public record of the evidence provided in public hearings. Although we are unable to comment on any evidence provided in camera, it seems that the in camera evidence largely relates to the specific instances of abuse rather than policy issues.4. Workplace policy issues and reform suggestions

In the table below we have set out some of the policy issues, and our comments and suggestions for reform where relevant. In summary, our view is that some relatively minor but important changes to the Fair Work Act and the powers and resources of Fair Work Australia and the Fair Work Ombudsman will substantially reduce the risk of exploitation and lead to behavioral change in those employers tempted to break the law. These changes will not however impose unreasonable compliance costs, or damage the Australian small business sector.

Issue View Comments / possible recommendations1. Does the Fair Work Yes Subject to our comments below, the evidence does not disclose loopholes

Act offer adequate in the law. Rather the evidence shows blatant and conscious avoidance,legislative protection and enforcement shortcomings.for employees?

Recommendation: The FCA does not see any need to change theunderlying provisions of the Fair Work Act except as specifically notedbelow.

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2. Does the Fair Work No Actions such as the liquidation of the employer entity appear to too easilyAct provide adequate allow a part to avoid the intended consequences of the law. The FCAsanctions against supports the introduction of other remedies such as incapacitation and

employers that breachdisqualification orders against directors of employers convicted of a serious

the Fair Work Act? breach.

Are the fines No The fines imposed upon the employers, and particularly directors andadequate? officers of employers, appear inadequate.

Recommendation: The FCA considers that the current level of finesshould be increased, and additional provisions inserted to make directors ofan employer entity personally liable in the event that an employer entity isliquidated without fully satisfying all debts to employees and penalties toFair Work Australia.

3. Do Fair Work Australia No? This is a matter for Fair Work Australia and the Fair Work Ombudsman.and the Fair Work However there was evidence that the resourcing of the regulators requiredOmbudsman have them to take more of an educative approach. This is a policy matter.adequate resources to However there was also evidence in the case of 7-Eleven that regulatorsinvestigate claims? had been unable to complete investigations in a timely manner. Fair Work

Australia indicated in evidence it required substantially more resources toincrease investigative and prosecution activity.

Recommendation: The FCA would support increased resourcing to FairWork Australia to increase its investigative and enforcement capabilities.

4. Do Fair Work Australia No? There was considerable evidence of evidential challenges faced by

and the Fair Workregulators in gaining proof, particularly if an employer denied breaching the

Ombudsman have law and there was no complainant willing to testify. 7-Eleven gave similaradequate resources to evidence concerning its own internal audit program. There was alsoinvestigate breaches evidence of lack of records inhibiting enforcement action. Informationand enforce the law? gathering powers are not as comprehensive as enjoyed by the ACCC or

ASIC.

Recommendation: The FCA believes consideration should be given toincreasing the information gathering powers of the regulators.

The FCA further recommend consideration be given to reversing the onusof proof if records are inadequate. In other words if an employer has notkept adequate records, the employer must establish its innocence ratherthan the regulator establish guilt.

5. Does the Fair Work No FWA and FWO enforcement activity seems insufficient in circumstancesAct enforcement where international workers are reluctant to speak up. (Often due to visa

regime act as aconsequences.) An amnesty may work, but that ignores other reasons why

deterrent and promote workers may willingly stay silent and also does not address (and possiblecompliance? encourages) the provision of false information in visa applications.

6. Does the Fair Work No There was evidence of employer entities structured to avoid complianceAct provide adequate obligations, and challenges in proving individual liability. The penaltiessanctions against against individuals also seem light.parties that aid or abeta breach? Recommendation: The FCA recommends that penalties against

individuals are increased to a level commensurate with those applyingunder the Competition and Consumer Act or immigration laws.The FCA further recommends that personal liability extended without theneed to prove knowledge where the individual is a director of the employerand the employer becomes insolvent or otherwise unable to pay fines andmake restitution to employees.

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7. Should third parties No There was evidence of organisations structuring themselves so as tosuch as franchisors, deliberately step away from a direct employment relationship, notably in

labour hire companiesoutsourcing and labour hire arrangements. In these instances an extension

and the like be liable? of the accessorial liability provisions could be justified. However this isbetter achieved by targeting directors of employers than by attempting toextend liability to third parties. The accessorial liability provisions aresubstantively identical to those that apply under the Competition andConsumer Act, and work well

8. Should third parties Maybe The FCA would wish to discuss this matter further with trade union andsuch as unions be able other stakeholders before forming a view.to take action againstemployers under thelegislation?

9. Does the Franchising Yes Committee members appeared to be surprised that franchisors are unableCode of Conduct need to immediately terminate a franchise agreement in the event of seriousto be amended? breach of workplace obligations. This is also a cause of significant

frustration to franchisors, and impedes their ability to assist the regulatorwith enforcement activities.

Recommendation: The FCA considers that the Franchising Code ofConduct should be amended to enable a franchisor to terminateimmediately in the event of serious breach of workplace legislation. TheFCA is prepared to consider inserting additional disclosure obligations infranchise documentation in relation to the explicit Awards and otherobligations that might apply to the franchisee, and a specific warningconcerning student visa requirements. However it did appear that theevidence showed the franchisees that breached their obligations in the 7-Eleven network were well aware of the legal position, but chose todeliberately breach the law.

10. Are other changes YesThe FCA offers the following comments as general observations, and in the

required? context of our earlier observations on overall causation. The visa programappears to be subject to widespread abuse, and needs to be reviewed toensure it meets policy objectives. Imposing a 20 hour work limit on studentvisas without appropriate safeguards and checks creates an environmentconducive to abuse. Additional remedies may need to be consideredincluding an offence of aiding or abetting abuse of a visa.

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Annexure A – Explaining franchisee behaviour

This annexure includes extracts from the Griffith University Asia-Pacific Centre for Franchising Excellence Report Survival of the fittest: The performance of franchised versus independent small business during economic uncertainty and recovery. This Report is a recommended resource for those seeking a deeper understanding of the franchise relationship.

Perhaps the greatest challenge for regulators in the franchise sector is determining the extent to which legislation interferes with what on the face of it ought to be a normal business contractual relationship. Some countries – the United Kingdom, Singapore, Hong Kong and New Zealand – have felt no need to intervene at all. Australia on the other hand has taken a far more paternalistic approach. Yet some remain unsatisfied, urging Government to intervene still further.

The Griffith University Report sheds important light on the regulatory framework. It arguably demonstrates that not only is further legislative intervention not necessary, but it may well be fruitless. The Report confirms current information is adequate for those prepared to make what might be expected to be normal efforts to undertake due diligence. The Report shows a clear correlation between effort put into due diligence and success. The same no doubt applies to the operation of the business itself. It is clear that for those that make the effort, the framework works well and there is more than adequate information. For those that have access to the same information, but do not make the effort, it is not obvious what else can be done or indeed even should be done.

Extract Page Comment

“Franchisees and independent contractors have distinctly i The highlighted words aredifferent motivations for entering business and possess interesting, and perhaps helpdifferent psychological traits. Franchisees seek the security explain why it is an ongoingof a franchise network and are risk avoiders.. Franchisees challenge to meet arated their pre-entry experiences (access to information, franchisee’s expectations.due diligence and decision making ability) positively andthey valued the franchisor-franchisee relationship.However their adaptability and autonomy levels were lowerthan independent business owners and they were morelikely to suffer stress and regret.”

“Given their overall greater feelings of confidence and ii Psychologist Greg Nathanautonomy, independents were more willing to take notes that blaming others is aresponsibility for failure or setbacks than franchisees, who fundamental and valid humantended to attribute blame to external factors.” coping mechanism, and helps

avoid consequences such asdepression. Understandingthat blaming is a naturalbehaviour also helps explainwhy some franchiseeallegations that appear on facevalue to be honestly madeultimately prove to be false.

“The research revealed that economic conditions affected ii This is consistent with the FCAall businesses similarly and that personal factors such as experience that the differencesmotivations, personality, decision making autonomy and between views in most disputesadaptability were more likely to affect business survival than relate to mismatchedexternal factors.” expectations rather than any

inappropriate behaviour. Andthat most businesses fail forbusiness rather than

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“franchising” reasons.

“Successful franchisees believed that sufficient information 14,15 This reinforces the FCA’s viewwas available to them, spent considerable time in that there is adequateresearching the business opportunity, sought considerable information available forexternal guidance and were actively and personally franchisees. It also indicatesinvolved throughout the evaluation phase. On the other that further information ishand struggling or failed franchisees believed that available unlikely to assist those that doinformation was insufficient…underutilised (or even not properly use the currentdiscounted) independent external advice and would framework.overemphasise the importance of … entering smallbusiness over and above other pre-entry considerations.”

“..just under half of the interviewees indicated that they had 12 It is not the role of legislation toignored or overridden the advice provided by external protect people who choose notadvisors in their quest to become self-employed.” to take advantage of the current

legislative framework.

“The lure of being one’s own boss appeared to impact the 12conduct of adequate due diligence.”

“… it was apparent that successful franchisees exerted 11 It is also logical that those whosignificantly more effort in conducting adequate due put the appropriate effort intodiligence than struggling or exited franchisees.” due diligence will also put the

appropriate effort into businessoperations. Regulation shouldnot be drafted to protect thosewho are not prepared to put insufficient effort to due diligence.

“Most franchisee experts reported that potential franchisees 13,14 This confirms that franchiseewere provided with more information than would be experts have adequateavailable to independent operators. In particular, most information. It also provides asuggested that franchising was more transparent, and useful reminder of the contextprovided more detailed information to potential entrants as of franchising vis a vis smallit had a structure behind it.” business generally.

Most successful franchisees considered the franchise 20,22 Further evidence that theagreement to be “both fair and equitable” and “franchising current franchising laws work,matched their expectations”, whereas struggling or exited particularly when the contrastfranchisees felt the franchise agreement “did not provide a with retail tenancies is provided.true representation of what was expected.” “However in the The tenancy example showscontext of shopping centre leases a different picture that if there is a genuineemerges…” “All interviewees expressed concern in terms problem, all parties will see it asof the nature of shopping centre lease agreements and the a problem.propensity for landlords to act unethically in increasing rentrequirements.”

84% of surviving franchisees and 80% of failed franchisees 65 These figures support thefelt that there was enough information given to me to make FCA’s contention that currentan informed decision about buying my franchise. information is comprehensive.Interestingly, only 28% of failed franchisees wished therewas more information.

Failed franchisees rated information given as very relevant 67 These figures provide strong(85%), very accurate (80%), very complete (77%) and very statistical support for thehelpful (85%). Failed franchisees fully understood their current regulatory balance.obligations in the franchise agreement (85%) and felt themto be fair and equitable (84%). The percentages forsuccessful franchisees were only slightly higher.

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Annexure B – List of FCA Members1800 ONHOLD7ElevenAABC CentresABS Automotive Service Centres AMC Commercial Cleaning ANZ Mobile LendingAPCO Service StationsAce Body Corporate Management Advantage Partners Lawyers Afea Care ServicesAktiv Brands Ali Baba AllensAlter It Amazing CleanAmber Group Australia Amcal MaxAndersens Floor Coverings Anytime AustraliaAon Risk Services Australia Ltd Appliance Tagging Services Aromas FranchisingAsia-Pacific Centre for Franchising Excellence - Griffith University Logan Campus Aussie Home Loans

Aussie Pooch Mobile Australia PostAustralian Accounting & Franchising Professionals Pty Ltd Australian Colon HealthAustralian Franchising Corporation Pty Ltd Australian Hot WaterAustralian Independent Vendors Australian Skin ClinicsAuto OneAutobarnAutosmart Australia Pty LtdBBB's cafeBCI Business BrokersBCM Business Cost Management BIG4 Holiday ParksBNR PartnersBabo GroupBaby SensoryBack In Motion Health GroupBackcare and Seating Master Franchise Unit Trust Baker & McKenzieBakers DelightBalance Internet Banjo's

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Bank of QueenslandBarbeques GaloreBartercardBase ZeroBaskin Robbins AustraliaBathroomWerxBaybridge LawyersBeacon LightingBeaumont TilesBedshedBell Legal GroupBenchmark Business & Commercial SalesBendigo and Adelaide BankBenga DesignsBig Boy BBQBodiez 24/7 FitnessBonbons BakeryBooks and Gifts DirectBookwiz FranchisingBoost JuiceBorrello Graham LawyersBoulangerie de FranceBrandon IndustriesBrazilian BeautyBrazilian ButterflyBrian Tracy Global Pty LtdBridgestoneBriggins Pty LtdBrotzeit German Bier Bar & RestaurantBrumby's BakeryBucking BullBurger EdgeBurger UrgeBurgerFuel AustraliaBusiness Development AllianceBusiness Essentials Pty LtdBusy BookkeepingBuy Australian PropertiesCCGB PublishingCIE LegalCafe2UCaffe Primo LicensingCappuccino XpressCarpet CourtCartridge World AustraliaCash ConvertersCashflow ItCharter SecurityChatimeChess Wealth Partners

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Chicken TreatChocolateria San ChurroChoice HotelsCibo EspressoCitiwideCity Farmers DogwashCivic Video Pty LtdClark RubberCoco CubanoCocolat FranchisingCoerver CoachingCoffee GuruCoffee HitCoffee News AustraliaColeman Greig LawyersCondon AssociatesCoochie HydroGreenCoolabah Tree CafesCooper AutomotiveCooper Grace WardCoral HomesCountry Comfort International Pte LtdCouriers PleaseCrema EspressoCroissant ExpressCrust Gourmet PizzaDDC StrategyDMAW LawyersDOGUEDale Wood Business Sales ConsultancyDavid LegalDecoRugDecoglazeDeloitte PrivateDiscount Drug StoresDixon HomesDodo ConnectDogTech InternationalDonut KingDosa PlazaDoyles In CarDream DoorsDreamy DonutsDrummond GolfEEFM Health ClubsENZEDEagle BoysEarthbornEcomist Australia

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Elemental Hot YogaElite Maintenance ServicesElla BacheEmbroidMeEndota SpaEnvie FitnessEnviro Chasing ServicesEsquires CoffeeEssential BeautyExecutive Property MaintenanceExpense Reduction AnalystsEzy Rental EquipmentFFC Business SolutionsFCF Fire & ElectricalFRANdataFamily Car RentalsFasta Pasta Pty LtdFastway CouriersFerguson Cannon LawyersFerguson PlarreFernwoodFerrari East Pty LtdFifo Capital AustraliaFiltaFryFindit SmartFinn Franchise BrokersFirst Class AccountsFirst Class CapitalFisher & PaykelFisher Adams KellyFitness Enhancement Personal TrainingFix 'N' ChipsFlannerys Natural & Organic SupermarketFlip OutFloorworldFoodcoFootball Star AcademyFordham Business Advisors Pty LtdForte School of MusicForty Winks Franchising Pty LtdFranchise Advisory CentreFranchise Advisory ServiceFranchise AustraliaFranchise Fitouts Australia Pty LtdFranchise Relationships InstituteFranchise RightFranchise StrategiesFranchise Systems GroupFranchising ExpoFranchising magazine

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FreedomFrontline Recruitment GroupFunk Coffee & FoodGG. J. Gardner HomesGadens Lawyers MelbourneGametradersGaze Burt SolicitorsGecko SportsGelare CafeGelatissimoGenesis Fitness ClubsGeotech Information ServicesGeowash Pty LtdGlenvill RegionalGlobal Road TechnologyGloria Jean's CoffeesGodfreysGow-Gates Insurance BrokersGrace Removals GroupGranite TransformationsGreenstaffGrey ArmyGrill'dGroove Train System Pty LtdGroutPro AustraliaGrubers BeckettGutter-VacHHR CentralHR LegalHWL Ebsworth LawyersHaarsma LawyersHairhouse WarehouseHall & Wilcox LawyersHall Chadwick NSWHannaford Seedmaster ServicesHarry's Cafe de WheelsHatch Chicken ShopHelen O'Grady Drama AcademyHelloworldHertzHill MayohHip Pocket Workwear & SafetyHire A HubbyHolding RedlichHolley Nethercote Commercial & Financial Services LawyersHolman Webb LawyersHome Ice CreamHome Instead Senior CareHorizon Communication Group

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Horseland SaddleryHosemasters InternationalHouseHouspectHow To Franchise SimplyHowards Storage WorldHudsons CoffeeHungry Jack'sHydroKleenII Can ReadICMI Speakers & EntertainersIgnite PR & MarketingImpact HygieneIn the BoothInXpressIndian Brothers RestaurantInk On The RunInspect My HomeInspirations Paint Store (Holdings) LtdInsurance Made EasyIvan Poole LawyersJJamaica BlueJan-Pro Cleaning SystemsJani-King (Australia) Pty LtdJaxquickfit TyresJesters PiesJim's AntennasJim's Bath ResurfacingJim's Bin CleaningJim's BlindsJim's BookkeepingJim's Building InspectionsJim's Building MaintenanceJim's Car CleaningJim's Carpet CleaningJim's CleaningJim's ComputersJim's ConveyancingJim's DiggersJim's Dog WashJim's ElectricalJim's FencingJim's Finance ProfessionalsJim's GlassJim's GroupJim's Heating and CoolingJim's LocksmithJim's MowingJim's Painting

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Jim's PavingJim's Pest ControlJim's PlumbingJim's Pool CareJim's RemovalsJim's RoofingJim's SecurityJim's Shade SailsJim's Skip BinsJim's Test &TagJim's Traffic ControlJim's TreesJim's Window & Pressure CleaningJim's Window TintingJust CutsKK & L Gates MelbourneK2 Recruitment and ConsultingKFCKeen to CleanKelly SportsKids KornerKidz 'N SportKilpatrick Townsend & Stockton LLPKindy Dance TimeKnaufKnight Frank AustraliaKoala KraneKosama FitnessKubarz Beverage CateringKubed LegalKumon Australia Pty LtdKwik Kopy AustraliaLL J HookerLa PorchettaLaser Clinics AustraliaLaser GroupLaubman & PankLease1LeaseEagleLeasewise GroupLegal VisionLenard'sLewrapListon LandersLittle Kickers & Little RugbyLiving HereLoan MarketLollipops Playlands InternationalLonestar Rib House

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Looksmart AlterationsLookup Solutions Pty LtdLuxottica Retail AustraliaLyons Babington LawyersMM+K LawyersMDS LegalMSI Taylor Business Services Pty LtdMST LawyersMYOBMad Mex Fresh Mexican GrillMaddocksMadgwicks LawyersMalayasian Convention & Exhibition BureauManagement Institute of AustraliaMarShere Dance StudiosMarsh & Maher LawyersMassage ClubMastercare FranchisingMcCarthy Durie LawyersMcDonald's Australia LtdMcInnes Wilson LawyersMcKinley PlowmanMcLean DelmoMcMahon Fearnley LawyersMegasealed BathroomsMelbourne Body Corporate Management Pty LtdMichel's PatisserieMidas AustraliaMills Oakley LawyersMinc ServicesMinor DKL Food GroupMint Franchise CleaningMinter Ellison LawyersMinuteman PressMister MinitMobile Filtration ServicesMobile Skips Pty LtdMobile Test 'N' CalMonaco LawyersMonkey ManiaMontezuma's AustraliaMortgage ChoiceMovenpick Ice CreamMpower Franchising Pty LtdMr RentalMrs Fields and Cookie ManMuffin BreakMurfett LegalMurray Pest ControlMuzz Buzz

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NNando's AustraliaNarellan PoolsNational Franchise Insurance BrokersNew Life Repair ServicesNew York SliceNew Zealand NaturalNewhouse & Arnold SolicitorsNightOwl Convenience StoresNoodle BoxNorton Rose Fulbright AustraliaOOPSMOffice BrandsOffice ChoiceOliver's Real FoodOpen2ViewOportoOrderMateOutback Jacks Bar & GrillOutside ConceptsOven & BBQ CleaningOvenuOz Design FurnitureOzSpy Pty LtdPPRDnationwidePack & SendPaleo CafePalisade Business ConsultingPandoraParaserve Pty LtdParmalat Australia Pty LtdParty PlusPastacupPeddersPets DomainPetstockPiper Alderman VictoriaPirtekPitcher Partners - VICPizza CapersPizza HutPlan Ahead EventsPlatinum ElectriciansPlus Fitness Health ClubsPointon PartnersPoolWerxPresse Cafe AustraliaPrice AttackPriceline Pharmacy

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Project Panel HomesProvender AustraliaQQuest Serviced ApartmentsQuick Service Restaurant HoldingsRRAMS Financial GroupRE/MAX AustraliaREST Industry SuperRYCO 24 7Ray WhiteReStart1000Ready Steady Go KidsReal Mastery ConsultingReal Property PhotographyRecruitment Coach Pty LtdRecruitment VisionRed Rock Noodle BarRed RoosterRedCatRedchip LawyersRefreshRefuelling SolutionsReliance PartnersReliance Roof RestorationsResi MortgageResidential Garage DoorsRetail Food GroupRetail ZooRobbins WatsonRobert James LawyersRolld AustraliaRoof SealRouse LawyersRozzi's Italian CanteenRucker FinancialSSBA LawSRJ Walker WaylandSafetyQuip Australia Pty Ltd.Sailtime AustraliaSalon ExpressSalsa's Fresh Mex GrillSalts of the EarthScentre GroupSchnitz Franchising Pty LtdScopeIT EducationSeal-A-FridgeSenior HelpersShaver ShopSherpa Kids Australia

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Shift8Shingle InnSignaramaSignwave AustraliaSilver Chef LtdSkewerZSkinKandySleepysSmartlineSnapSnap Fitness Corporate AustraliaSnap-on Tools (Australia) Pty LtdSnooze Sleep WellSolomon Humble Commercial LawyersSolutions Franchising Group Pty LtdSoul Origin AustraliaSpanish DoughnutsSpanline AustraliaSpecsaversSpectrum AnalysisSportscoSportzing Court CareSprint Auto Parts Franchising Pty LtdSpudbarStain Busters Cleaning SystemsSteamaticStephens Lawyers & ConsultantsStewart Germann Law OfficeStorage KingStrategic Flow ManagementStroud HomesSubwaySuccess Tax ProfessionalsSumo SaladSunshine KebabsSuperfinish ExpressSushi IzuSushi Sushi Franchising Pty LtdSwaab AttorneysSwiftPOS Pty LtdSwimartTTSG Franchise ManagementTarget TrainingTaskforce AustraliaTasty TrucksTatts LotteriesTaxAssist AccountantsThe Athlete's FootThe Barry Plant GroupThe Cheesecake Shop

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The Coffee ClubThe Coffee EmporiumThe Coffee GuyThe Drug Detection AgencyThe Franchise ShopThe Frenchams GroupThe Interface Financial GroupThe Leather Doctor AustraliaThe Lucky CharmThe MBA Partnership Pty LtdThe Natural WayThe Outdoor Furniture SpecialistsThe Tea and Coffee MerchantThe Touch Up GuysTheobromaThink DONE Management ConsultancyThink Water Pty LtdThomson Geer LawyersThree Beans Coffee, Vanilla, MungTiger PistolTile RescueTimezoneTint a CarTokyo Sushi KitchenTop Snap InternationalTotal ToolsTotally WorkwearTotalspan AustraliaTouch Rugby League (TRL)Town & Country Pizza & PastaTowncars AustraliaTrade TravelTransworld Business AdvisorsTraxion TrainingTriSkillsTurner Freeman LawyersTutor DoctorTutti Frutti Frozen YogurtTyres & MoreUUCMAS Australia National FranchiseUltra Tune SAUnited Franchise GroupUnited PetroleumVV.I.P. Home ServicesVentisVision Personal TrainingWWalker Wayland WAWatkins Tapsell

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Wax It Pty LtdWeeding Women FranchisingWendy's Milk BarWestpac Banking CorpWet-sealWhat Scratch?Wheel Change UWhirlwind PrintWisewould Mahony LawyersWorkforce ExtensionsWorkplace WingWorld ManagerWray OrganicWraysXXpresso DelightXpresso Mobile CafeYYankee Candle AustraliaYarra Valley FarmsYes OptusYum RestaurantsZZEN Home Energy SystemsZambreroZarraffa's

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Annexure C – Draft Workplace Transparency Standard

DISCUSSION DRAFT - WORKPLACE TRANSPARENCY STANDARD – FRANCHISORS

Displaying this Workplace Transparency Standard is a representation made by the franchisor listed on the Australian Franchise Registry (the Franchisor) to the Australian Franchise Registry and all persons that rely on the Australian Franchise Registry that it satisfies the elements described in the Worklpace Transparency Standard.

The Franchisor acknowledges that the Australian Franchise Registry will, and third parties may, rely on the truth and accuracy of this representation, and warrants that it will notify the Australian Franchise Registry in writing immediately the representation is no longer truthful and accurate in all respects.

The Australian Franchise Registry does not vet or audit compliance by the Franchisor with this Standard, and the Standard is otherwise subject to the terms and conditions that apply to the operation and use of the Australian Franchise Registry.

1. Franchisors that apply to be displayed as meeting this Transparency Standard certify that:-

a. they understand all relevant Awards that apply to all of their employees, and all employees of related entities, including pay rates, minimum wages, penalty rates and loadings; and

b. they make and will keep for 7 years all employee time records of the kind prescribed by the Fair Work Regulations 2009 (the FW Regulations) including:-

i. records of the number, or the start and finish times, of ordinary hours worked by employees in accordance with the FW Regulations;

ii. the number, or the start and finish times, of overtime hours worked by employees in accordance with regulation 3.34 of the FW Regulations; and

iii. all pay records for 7 years of the kind prescribed by the FW Regulations.

c. They comply with section 536 of the FW Act by comply with the contents prescribed by the FW Regulations relation to payslips;

d. They have established and will maintain a hotline and/or nominate a point of contact to deal with workplace enquires from its employees and provide the details of the hotline and/or point of contact to all new employees on commencement of employement, and to all existing employees in writing at least once in each financial year;

e. They will take the following steps to ensure compliance with applicable Commonwealth workplace laws and instruments, including but not limited to the Fair Work Act and Regulations and the relevant Awards:-

i. implement systems and processes to ensure ongoing compliance with the obligations referred to in paragraph 1(b) above, including obligations relating to rates of pay, loadings, penalties, taxation, superannuation and record keeping; and

ii. establish an internal audit process to verify at least once each financial year compliance with Commonwealth workplace laws;

iii. establish and maintain a training program so that all persons responsible, either directly or indirectly, for the compliance with Commonwealth workplace laws and instruments, including all the company Directors, are made aware of employer obligations under Commonwealth workplace laws;

iv. provide training material to participants in the training including material on:

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(i) compliance with the FW Act, Fair Work Regulations and the relevant Awards;

(ii) employer obligations in respect to record keeping and pay slips;

(iii) options available to persons to make complaints and FWO contact information; and

(iv) how to access FWO resources to calculate rates of pay;

2. Franchisors that meet this Transparency Standard further certify in respect of all franchisees (Franchisees) that are employers of employees within their franchise network that:-

a. they have provided training to all franchisees in relation to the matters listed in paragraph 1 above;

b. information concerning the matters contained in paragraph 1 above is contained in the operations or procedures manual provided to all franchisees, and such information is kept up to date;

c. the hotline and/or nominated a point of contact for workplace enquires from employees of the Franchisor is also available to all employees of all Franchisees;

d. they have required all Franchisees to provide the details of the hotline and/or point of contact to all new employees of Franchisees on commencement of employement, and to all existing employees of Franchisees in writing at least once in each financial year

e. they will monitor compliance with applicable Commonwealth workplace laws by all Franchisees as part of normal operational and field audits and inspections;

f. they will require any Franchisee to take appropriate remedial action to rectify any identified contraventions of such laws or instruments in the event that they become aware of any breach by a Franchisee of the Franchisee’s obligations as an employer; and

g. they will notify Fair Work Australia of any serious breach of Commonwealth workplace laws by ay Franchisee.

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djpr.vic.gov.au · Web viewThe Australian franchise sector makes a very substantial contribution to the Australian economy, and the comprehensive Federal regulatory regime is generally

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