The Franchise Association of New Zealand has come out in favour of franchise regulation with calls for six specific recommendations to be included in legislation currently before parliament.
In This Article* Good or Bad For Franchisors?
* How Would It Work?The recommendations proposed by the Association, which will be submitted to a Parliamentary Select Committee shortly, are
1. A registration system for organisations which offer franchises for sale.
2. Registration of advisors to the franchise industry.
3. Terms which can result in disqualification from registration. Association chairman Miles Agmen-Smith said these will be similar to
regulations covering company director or investment adviser disqualification.
4. A system for registration of sub-franchisees with their franchise system.
5. Extension of the Association’s own disclosure document requirements to all franchises.
6. Compulsory mediation before any disputes or entering arbitration or other legal routes.
Mr Agmen-Smith said that following a meeting with Minister of Commerce The Hon. Lianne Dalziel on 12 February, the Association would make these recommendations in a submission to the Financial Services Provider (Registration and Dispute Resolution) Bill which is currently before the Finance and Expenditure Select Committee. The recommendations are intended to give added protection to people investing in franchised businesses.
Mr. Les Stewart, MBA on February 14th, 2008 at 10:21 am
Franchising has developed as an extremely powerful tool within our economies. It has contributed to the creation and growth of extremely successful and worthwhile products and goods.
There are some systemic vulnerabilities, however.
For the investor, the separation of ownership of the assets versus the control of them is problematic. The store owner (franchisee) owns the bulk of the assets while the franchisor (system owner) controls them via contract and management practices.
Opportunism is the correct term to apply to this investment vulnerability. Opportunism has also been defined as “self-interest only with guile.”
Protecting both parties (franchisees against opportunism and franchisors against free-riding) is what makes franchising unique among small business.
Those that fail to understand the role of Franchising Opportunism are at great risk of not achieving their financial goals.
Les Stewart
Canada