Hollow ring to SA as “safest state” for business

The passage of the Small Business Commissioner bill in South Australia’s upper house last week heralds a new and dangerous era for franchising in that state.

Despite a shoddy consultation process by the SA Government and selective descriptions by SA Business Minister Tom Koutsantonis which labelled the bill as “based on the successful Victorian model”, media releases by Koutsantonis and Parliamentary colleague Tony Piccolo leave no doubt that franchising will be the first business sector in the crossfire.

Indeed a weekend media statement from Piccolo specifically mentioned franchising and farming as areas that will most likely receive almost immediate attention once the bill is enacted.

Never mind that the bill does not limit its legal reach to South Australia alone, or that it is silent on the issue of whether or not it will defer to the Australian Competition and Consumer Commission (ACCC) if both state and national bodies find themselves investigating the same thing.

Aside from the extraordinary powers it conveys to the state Business Minister, who can prescribe an industry code (such as for franchising) at any time and use the office of the Small Business Commissioner as a kangaroo court to enforce it, what is most breathtaking about this bill is the naiveté of the rhetoric behind it.

“South Australia will now be the safest place in Australia to do business” trumpets the chest-beating media releases, because the SA Government has now usurped the role of the Federal Government in determining franchise regulation.

Perhaps while they’re at it, the South Australian Government might like to take on other federal roles, like defence, border security or taxation?

Meanwhile as the “safest place to do business in Australia” hoards of interstate business migrants will of course relocate to SA to set up shop, secure in the knowledge that their businesses can’t possibly fail as the Small Business Commissioner bill will provide universal protection from economic cycles and other normal daily challenges in running a business.

Maybe word of South Australia’s new reputation as a risk-free zone for aspiring business entrants will spread offshore, prompting people smugglers to redirect their boats to Kangaroo Island instead of Christmas Island?

In this utopian business paradise, market forces will be replaced by peppercorn rents and customers with bulging wallets who have no desire to shop online but will once again flock to retail outlets in their droves. Any ripples in this pond will be dealt with most severely by the Small Business Commissioner using the legislative baseball bat with which they are equipped, and where the bat falls short, the Business Minister will prescribe a new industry code to extend its reach.

Aspiring business entrants will be required to do nothing to ensure their future success other than to complain to the Commissioner when things go wrong, and the Commissioner will then leap into action and fix everything in no time at all.

Business planning, due diligence and the use of appropriate legal and accounting advice before entering any kind of business or franchise agreement will no longer be necessary, because the existence of the Small Business Commissioner bill alone has now made South Australia “the safest place in Australia to do business”.

This “safest place” statement is ridiculous nonsense that lulls the gullible into thinking that there will be little or no risk involved in running a business in South Australia because the Small Business Commissioner will prevent any harm occurring. What rubbish.

Instead of peddling rhetoric and misinformation about SA being the “safest place”, the South Australian Government should be following the recommendations from its own franchise inquiry in 2008 to provide better pre-entry education for potential franchisees and small business intenders. Instead, it has continued to ignore its own recommendations to proactively assist people on the way into business by creating a blunt instrument to swing at random when someone may be going out of business.

It’s the equivalent of removing driver training and safety tests, but increasing the penalties for traffic infringements after damage or injury has already occurred.

Meanwhile potential business intenders in SA may find the opportunities to buy a franchise reduced, as franchisors such as Game Traders and others decide to concentrate on other markets where only one, not two sets of franchising codes will operate. International franchise brands seeking a foothold in the Australian market have already excised SA from their growth plans due to the uncertainty over its future legislative landscape as a result of the Small Business Commissioner bill.

The only saving grace in the passage of the bill last week was an amendment for a consultation period before a code is prescribed. Given the way that the bill surreptitiously included the ability to prescribe industry codes after its consultation period this time around, the likelihood of a future consultation period being timed to minimise the amount of consultation required (such as over a December-January holiday period) is quite high.

But that’s okay, because we have to believe the politicians who have promised that SA will be the “safest place to do business in Australia”.

Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for nearly 20 years at franchisee, franchisor and advisor level.

He advises both potential and existing franchisors and franchisees, and conducts franchise education programs throughout Australia, and publishes Franchise News & Events, a fortnightly email news bulletin on franchising issues and trends.