Treasury floats proposal for franchisor licensing regime
The government has released a consultation exploring the potential introduction of a licensing regime for the franchising sector.
Treasury has established an internal taskforce to assess the feasibility of introducing a licensing regime for the franchising sector following the release of the Franchising Code of Conduct review earlier in the year.
As part of the 23 formal recommendations made in the independent review of franchising, the review recommended that the government investigate introducing a licensing regime to better regulate most aspects of the franchisor-franchisee relationship.
A consultation paper was released this week, with Treasury having sought views on whether to create a regime, how to address harms in the sector and how the regime can work.
The consultation paper noted that the introduction of a licensing regime would represent a substantial change in regulatory posture.
"A licensing regime would seek to promote positive commercial relationships, fair trade and access to justice, and competition within the sector."
"However, it is also important to consider the possible limitations of a licensing regime, including increased regulatory oversight and the operational constraints that may apply to the sector, as well as its transitional and ongoing costs."
The paper noted that the existing approach to education for the franchising sector largely relies on industry participants taking the initiative to self-educate.
Treasury said a licensing model could require pre-entry educational requirements for participants or set a minimum standard of guidance and support to be developed by a business before it can obtain a licence to operate as a franchise system.
"For example, there could be a requirement for franchisees to complete a course focusing on how franchising works, what the Code does and does not cover, and what due diligence they should undertake before signing a franchise agreement," the consultation paper said.
"Franchisors could have similar requirements, including the completion of training that outlines the expectations of a business selling franchising opportunities and their obligations under the Code, or that focuses on the skills required to improve the franchisor-franchisee relationship such as negotiation, change management or conflict resolution skills."
The consultation paper explained that if a licensing regime is applied to the franchising sector, this would establish a set of obligations a person must meet to obtain and hold a licence to undertake franchising as a regulated activity.
"These obligations could set a minimum standard for franchise systems, ensuring franchise opportunities brought to the market possess the required processes and supports to successfully operate as a franchise system in Australia," it said.
"For example, a potential licensing regime may require a business model to operate for a set time and across two or more locations before being eligible to apply for a franchising licence. This approach would allow time for a business model to mature and develop the supports and systems that a franchisee would reasonably expect under a franchise agreement."
About the author
