Regulating the industry

The Franchise Association says it has an open mind on the question of regulating the industry.

Franchising-specific legislation is a key proposal of the newly formed Free Trading Coalition, a body whose founders include the Motor Trade Association, Road Transport Forum and the Contractors Federation.

The coalition was launched  in June in response to the exercise of unfair and anti-competitive behaviours such as `take it or leave it' contracts.

It is advocating legislation to impose a code of practice on the franchising industry, along the same lines as was enacted in Australia in the late 1990s.

That code specifies what must be disclosed by a franchisor in negotiations with a franchisee, and allows a cooling-off period.

New Zealand's industry is self-regulating. Franchise Association chairman Mike Henderson says members are bound by a code of practice similar to Australia's. There is a code of ethics and members are  required to demonstrate compliance. There is also a complaints procedure and mediation panel to deal with disputes.

Henderson concedes, however, that only association members are covered by the voluntary regime. "The association's position at the moment is that it hasn't made a decision [about backing legislation],'' he says. It is informing board and association members  of the issue and legislative options before  gauging member support.

"We would like to think that if the New Zealand Government of today or tomorrow was to consider a change in franchising law or a change to unconscionable conduct law, or bringing in new codes of practice, we would be a voice in that process.''

Australia's franchising law is part of the Trade Practices Act, which includes provisions relating to unconscionable conduct that apply across the commercial sector. Those provisions are of concern to David Munn, the Franchise Association's solicitor, who points out that the existence of disproportionate bargaining power between two parties is one of 11 factors that could be sufficient to run foul of the law.

"That can potentially be quite unnerving for a business person in the negotiation phase. If you're going to bring in an Australian-type law, do you bring that in as well, my personal view would be no,'' says Munn.

Franchisors support the association's voluntary code but are open to the idea of legislation. Michael O'Driscoll, chief executive of Fastway Couriers, says  he would welcome any framework that added to credibility and security, so long as it didn't stifle growth.

Adrian Kenny, head of @ Your Request, says he's an advocate of full disclosure between franchisors and franchisees and the Australian law has the virtue of extending across the whole industry.