The operation of franchises in Australia has been a topic of considerable debate for more than three years. Unfortunately, much of this debate was initiated in response to revelations of wage underpayment practices within the fuel retail industry.
Since that time, there have been revelations of wage underpayments in the franchise networks of other industries (eg, retail, hospitality and transport) which, some politicians and media commentators argue, provides evidence of the systemic failure of the franchise model in Australia.
Yet, the franchise model (and dealer model) supports the operation of tens of thousands of small businesses in Australia which, in turn, provide the livelihood for nearly half a million Australians.
“In the Australian fuel sector, we estimate that just over half of the nation’s 7000 sites are operated by dealers/franchisees,” ACAPMA CEO Mark McKenzie said.
Given the heavy use of these types of models at present, any large scale political or legislative intervention in this area will likely have a far-reaching impact on the fuel industry in Australia in terms of business and employment destruction.
“That said, issues relating to wage underpayment practices and concerns about the fairness of current arrangements cannot go unaddressed”, Mr McKenzie said.
New laws, new review
In August 2017, the Australian government introduced new laws to tackle the issue of wage underpayment in franchise networks.
In addition, a joint parliamentary review of the ‘Operation and Effectiveness of the Franchise Code in Australia’ (including the Oil Code of Practice) was launched on 22 March 2018 with a view to providing a report back to the Australian parliament by 30 September 2018 (see the details of the Inquiry).
The inquiry sought submissions from interested parties by May 4, 2018, but strong interest among industry and other stakeholders has resulted in the inquiry receiving submissions well after the closing date – and more than 200 submissions received to date.
Further, the committee announced that the inquiry report would not be handed down until December 6, 2018 to provide sufficient time for consideration of the substantial number of submissions received.
Suffice to say, there has been considerable stakeholder and political interest in the deliberations of this high-profile Australian government committee.
In addition, separate class actions have been launched by at least two groups of franchisees against their fuel franchisors/marketers in the past 12 months – providing a further indication of just how heated this debate is becoming for our industry.
“The issues that have been identified in submissions to the parliamentary inquiry (and the allegations contained in the class actions) are significant and need to be properly considered and any issues identified must be comprehensively addressed”, Mr McKenzie said.
“But we are also concerned to ensure that the government does not rush to implement knee-jerk responses that ultimately compromise the future value of dealer and franchise arrangements in our industry.”
Impact on dealers and franchisees alike
The Oil Code, a variant of the Franchise Code, affects dealers and franchisees alike in the fuel retail industry. Consequently, there is an absolute need to ensure that the positive impact of any future change designed to address franchisees (ie, commission agents) does not have a negative impact on dealer arrangements.
ACAPMA is currently working with government, industry and all other stakeholders to advance actions that will address current concerns, while still maintaining the integrity of dealer and franchise arrangements.
“We can’t simply stick our heads in the sand on this one and wait for government to impose a solution on our industry,” Mr McKenzie said. “We must be part of the broader discussion about prospective solutions.”
Asia Pacific Fuel Industry Forum
To that end, the issue of the future of franchising and dealer arrangements will be a key focus for discussion at the Asia Pacific Fuel Industry Forum to be held in Auckland, New Zealand, on September 4-6, 2018.
Delegates at the forum will be engaged in a discussion about the changing face of franchise and dealer models on questions such as:
- What do the recent revelations and policy developments mean for the future of franchising and dealer models in Australia?
- Are there opportunities to improve the fairness and effectiveness of current franchise and dealer arrangements? If so, how?
- Or are we likely to see a decline in the popularity of franchise/dealer arrangements as large companies seek to minimise risk in the future?
A perspective on these questions will be provided by Jason Gehrke (Founder and Director of the Franchise Advisory Centre) in a keynote address to be given at the 2018 forum.
Jason is a director of the Franchise Council of Australia, a past chair of the World Franchise Council and is a director of two franchise groups – Inspirations Paint and Think Water. He is also a long-standing member of the Australian Competition and Consumer Commission’s Small Business and Franchising Consultative Committee.
ACAPMA plans to use the key themes arising from this discussion to guide future advocacy on this important industry discussion with government and regulators.
Online registrations for the Asia Pacific Fuel Industry Forum 2018 can be made by visiting the official website www.apfiforum.com
This is an edited version of a piece originally published by ACAPMA.
