Key figures in the print franchise industry have spoken out against the Turnbull Government changes to the industrial relations system targeting franchises and franchisors. Academics and franchise owners have also been disapproving.

The law makes franchises responsible for their franchisees, in cases where the franchises knew or ought reasonably to have known of the contravention and failed to take reasonable steps to prevent them. The maximum fine for franchises breaching the law is $540,000, or "five-times higher for bodies corporate".

The removal of this legal separation undermines the sector, say franchise experts and academics. Professor Lorelle Frazer, director of the Franchising Centre, Griffith University says, “The government’s plan to hold franchisors responsible for wage underpayments by their franchisees could undermine the business model of franchises.”

“Any attempt by government to impose further compliance obligations on franchisors would increase monitoring costs and affect that balance to the detriment of the sector.”

Shane Bertolotti, Snap franchise owner, Toowoomba and Dalby says, “At the end of the day I think we have to do far too much in terms of compliance as it is. Any extra reporting would be an extra cost for businesses.

“There needs to be a clear definition of what a franchisor and franchisee is, and there individual responsibilities. With such a broad law it is all open to interpretation.”

Clayton Treloar, CEO, Mail Boxes Etc (MBE) says, “Regulators should take into account size and resources, and there needs to be an improvement in the legislation. Our average business has three or four staff. Some of the big food chains have dozens, if not hundreds of employees on the books.”

He says that changes to law that require more reporting to the Fair Work Commission unfairly affect smaller sized franchises, like those in the print industry.

“It is a knee-jerk reaction to the 7-11 scandal. Franchises are already heavily regulated, especially compared to mum and dad stores that have the same issues.

“MBE is a regulated international brand. We protect our name, we protect our franchisees and follow the right steps for HR policy and procedures to look after our franchisees and employees. We do the right thing, but then you get rogue companies that do not seem to care, and it leaves a bad taste in people’s mouths.”

Frazer agrees, saying, “Franchisors have a moral obligation to ensure their franchisees comply with workplace laws. It also makes good business sense to protect the franchise brand and reputation.”

For Treloar, the amendments try to do a good thing, but in the wrong way. Instead, he says it should, “Focus on underpayment, not paperwork and technical judgement, and provide an approved compliance program as a clear defence against any prosecution. We know we are doing the right thing, but at the end of the day you can only lead a horse to water.

“They also need to include in the legislation a requirement for courts and legislators to take into account supplies, and resources.”

Evan Foster is the national director of the United Franchise Group, which features Signarama on its roster. He says the new laws are not needed, as the current laws have dealt with underpayment through the courts already.

“I think it unfairly charges franchise systems with an economy-wide issue. The scope of some of the language like ‘steps could have taken’ or ‘reasonably known’ is too broad. It might stop people from going down the franchise paths in the future. We have some other franchises we wanted to bring from the US and now we are wondering if we should bring them to Australia.”

The Franchise Council of Australia (FCA) has argued against some of the law changes, and been criticised for doing so, says Foster.

“We think the sector is incredibly strong in Australia, and the leadership looks after the interests of the sector.”

Treloar agrees, saying “I back what the Franchise Council of Australia believes because they want to protect the franchising industry. At the end of the day, the reason we don’t like this proposed bill is because it wraps up the whole industry under one banner.”

Frazer says the economics of franchising are carefully balanced against risk, reward and effort.

She says, “Joint responsibility under law could potentially burden the operating costs of franchise systems, thereby affecting their economic value. Knowing that franchisors are jointly responsible, franchisees could even free ride and become complacent towards compliance.

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