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National's failure to act on franchise regulation 'disappointing'

last updated on 23rd July 2009

12 June 2009 - The National Government's failure to address the lack of regulation in the small service orientated franchise sector is extremely disappointing and displays a complete lack of understanding of the needs of this part of the sector, Labour Commerce spokesperson Lianne Dalziel says.

Lianne Dalziel commented, 'Simon Power says the current law already meets the industry's need, but that stance assumes an equality of bargaining power that may exist with the large franchises, but fails the kind of people who are at the other end of the spectrum in what are usually service-oriented franchise operations.

'When I began the Review of Franchising Regulation last year it was because a couple of cases involving dozens of people - largely new New Zealanders - showed the potential for a major disaster.  Although the ‘Green Acres' case was attributable to the alleged fraud of a single Master Franchisee, the impact on those who had entered into what they thought were genuine franchise deals was significant.

'The people drawn to this type of small service orientated franchises such as lawn-mowing and ironing are often new migrants or those who have been made redundant and are looking for new work.

'I agree that the case has not been made out for a specific statutory framework for all franchise operations, however the fact that there have not been many instances of people losing their life savings is not an excuse to do nothing.  We should be ensuring that basic protections are in place, to minimise the risk of things going wrong, for those who are not in the best position to protect themselves. 

'Why do we have to wait for things to go wrong, before National is prepared to act?  I would have thought that the events of the last few years would have reinforced the need to have regulations in place before things go wrong.

'I personally favoured enhanced self-regulation through the Franchise Association of New Zealand, which would have ensured that all franchises were covered by a code of conduct with access to alternative dispute resolution should breaches of good faith occur.

'To do nothing as the Minister has announced today completely ignores the reality that there is not a level playing field at the lower end of the franchise spectrum.

'People new to New Zealand and those who are desperately seeking work deserve to know that there are standards and codes of conduct in place that offer them a certain level of protection when buying a small franchise," Lianne Dalziel said.

Read the Government's announcement.

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