The Australian federal government announced changes to the country’s national franchise regulations last week, and this week vocal South Australian State Labor MP Tony Piccolo says he will launch his own state-based bill.

How could this change Australian franchise regulations?

Currently the franchise business sector operates under one unified body of legislation, namely the Franchising Code of Conduct and parts of the Trade Practices Act.

Having consistent national laws makes it easier for franchise businesses to move from state to state, creating a consistent playing field.

The fact Australia has a) franchise legislation, and b) uniform regulations is often the reason Australia is referred to as ‘best practice’ and they’re one of the sector’s greatest strengths.

I was speaking with an American colleague and the world’s leading franchising researcher, Professor Rajiv Dant from University of Oklahoma when he was hosted by the Centre earlier this year.

Rajiv was saying what a mess the American franchise sector was, with each state having its own legislation and how impressed he was with the unified Australian approach.

Different rules in different states means greater barriers to entry as it increases legal costs.

It also makes it harder to analyse and identify sector trends requiring an apples and oranges comparison in some cases.

Pending the implications of state-based legislation franchisors may look past South Australia and focus on destinations with unified laws, given the relatively small South Australian market (with a population of only 1.6 million).

So what are Piccolo’s problems with the current franchise regulations reforms?

Mr Piccolo says the proposed federal reforms are “significantly inadequate”.

Three areas Mr Piccolo would like to see improved are:

1. Penalties for a breach of regulation
2. Improved dispute resolution 
3. An explicit requirement of ‘good faith’ in a franchisor’s dealing with franchisees

However, the federal government is setting up an Expert Panel (members yet to be confirmed) which will look into whether a definition of ‘Good Faith’ needs to be developed and/or examples or guidelines given, and similar for unconscionable conduct.

The panel will also look at whether there are other aspects of franchising that need to be addressed either through legislation, Franchising Code of Conduct reforms or other means.

The panel will have to work to a tight timeframe with a report due end of February.

Franchise regulations into the future

Although it’s been nearly 12 months since the 2008 Federal Franchise Enquiry, perhaps it’s not such a bad thing the Minister has been taking his time to deliver a considered approach.

However, with Piccolo having state Labor caucus approval to draft legislation and in-principle support of the South Australian Liberal Opposition he is anticipating the bill will be introduced into State Parliament later this month or early December.

In light of possible outcomes from the expert panel report, perhaps it would be better to wait until federal franchising regulation reforms are finalised before jumping into state-based legislation – a unified approach to franchise regulations is ultimately much stronger and the ideal.