US franchises urged to avoid Australia, consider NZ instead - UPDATED

A recent report in the Australian Financial Review suggested that United States franchisors considering international expansion to Australia were to be encouraged by the IFA (their national franchise association) to consider alternative destinations such as Canada and New Zealand because of the risks of joint employer liability under Australia's proposed Vulnerable Workers Bill, which would hold franchisors financially responsible for wage underpayments by franchisees.

However, it appears that no such circular was ever issued. The AFR report was based upon leaked emails sent to the US ambassador to Australia from Bruce Billson, the former Minister for Small Business who is now the chairman of the Franchise Council of Australia.

In one of the leaked emails quoted by the AFR, Billson tells Ambassador Hockey: "[Not for sharing]: I have seen an early version of internal IFA [the International Franchise Association] guidance to its members suggesting to US systems contemplating major investments in Australia to 'suspend all new business starts and investment in Australia' until the impact of the planned 'joint employer' laws can be fully assessed and for franchise systems to consider Canada and New Zealand as attractive alternatives."

Whether such guidance was ever drafted or not, our sources say the IFA Board is strongly denying that such a statement or message was issued.

While the legislative response of franchisor responsibility for franchisees' wage underpayments in Australia has been triggered by widespread wage fraud in the 7-Eleven network, in the United States joint employer liability issues have instead been triggered by union-sponsored lobbying to mandate minimum wages across branded groups. This is already possible in Australia via modern awards and enterprise agreements.

Media reports have suggested that current delays in voting on the Bill are partly the result of lobbying by the Franchise Council of Australia. The FCA has a page dedicated to the Bill - read it here