9 October 2017
Speech - #2017023, 2017

‘Franchise intelligence’, Address to the National Franchising Convention, Gold Coast

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Good morning, everyone — it's fantastic to be here.

I'm no Shark or Bear — far from it, in fact. But I can't help but notice the lush fairways and the rolling greens here at the Pines.

The remarkable thing about golf is that it's pretty much the same game as the one played in 15th century Scotland.

However, there's one noticeable change.

Lighter, stronger clubs allow the pros to hit the ball further and straighter: innovation and technology has made the sweet spot bigger.

You could say the same about franchising.

The modern day franchising concept is similar to the one Isaac Singer used in the 1860s to license out the servicing and repairs of his famous sewing machines.[1]

You still need a novel idea and hard yakka to make franchising work — nothing has changed about that.

The big difference today is that technology allows you to hit higher sales targets, reach more consumers and, basically, improve the way you do business.

It's the type of innovation we need if we're to grow Australia's economy — to create jobs and boost living standards.

Passion to succeed

It's not the Government's role to tell you what technology is best or how to run your business smarter. There are plenty of experts here for that.

The Government's role — my job — is to put the right settings in place so the small business community can innovate and grow.

And I see the 79,000 franchise units dotted around Australia as a strong part of this vibrant small business community.

I've seen proof of that in visiting more than 60 towns across the country as a part of the small business government roadshow.

In the past year, the roadshow allowed me to get out and listen to hundreds of small business and franchising people.

This is important because it's your feedback, your ideas, which drive the policy development we need.

It's your stories which hold the most sway when I'm pressing the need for change and championing your cause in Canberra.

Whether it's walking down Main Street, grabbing a bite to eat or filling up the petrol tank, I've met some great franchising people.

I've heard how franchisees have put their savings on the line to start a new, successful chapter in their lives.

In many regional areas, I've heard how franchise businesses are giving young people their first taste of the workforce.

Most of all, I've heard about your passion to succeed.

I recently visited some great Franchises in Adelaide, including an Amcal chemist and Pasta Chef. These are hardworking small businesses at their best.

A bright outlook

It's hard to capture or measure this type of passion but the National Australia Bank has made a pretty good fist of it.

In releasing the Moments that Matter: Understanding Australian SMEs whitepaper, NAB's Angela Mentis said:

While sales and profits are important for Australian SMEs, it is clear customers are why thousands of small business owners around the country get up and do what they do.

Ms Mentis said:

Despite intense workloads and pressures on all fronts, business owners are energised and motivated by their customers to succeed.[2]

NAB's paper also confirms what small business owners and franchisees have been telling me as I go around the country — the Coalition Government is listening and delivering for small business and franchisees.

With tax cuts, an extension to the instant asset write-off, red tape reduction, simplification of the Business Activity Statement and many other initiatives, the outlook looks bright.

Ferguson Plarre Bakehouse

Let me give you one example.

Recently, I had the pleasure of meeting Vince Spinelli, who runs the Ferguson Plarre Bakehouse franchise in Sunbury, Victoria.

The bakehouse franchise system is well-known for providing cakes for every and any occasion, as well as their famed Tiddly Oggies — a 'proper' meat and veg Cornish pastry.[3]

It's a family-run franchise, which Vince has had for six years. Fittingly, you could say he has a baker's dozen employees, too.

And in March this year he wanted to refurbish the shop to cater to the changing demands of his customers.

Vince did so with the help of the instant asset write-off.

The program, which we've extended to 30 June 2018, enables small business owners, like Vince, to invest in their business by immediately writing-off the cost of purchasing machinery and equipment costing less than $20,000 each.

Today, his bakehouse franchise can keep doing what it does best and will have a bright future thanks to the support from this Government.

But Vince is not the only one with a spring in his step.

The NAB paper reveals SMEs are confident about the future, with 71 per cent believing Australia is a great place to have a business and be successful.[4]

Innovation agenda

In the business world there are many markers of success — innovation is one that features prominently, for good reason.

Innovation keeps us competitive.

It allows us to catch the next wave of prosperity.

And it applies to every sector of the economy, whether it be running a franchise, factory or farm.

That's why we have an Innovation Agenda.

It's a billion-dollar package that will pave the way to a more innovative and entrepreneurial economy.

It means it'll be easier for Australians to try something different or start something new.

We are putting our eggs in the innovation basket because the 'pace of change, supercharged by new and emerging technologies, has never been so great'.[5]

We're making practical changes.

We've delivered tax incentives to encourage investment in innovative start-ups.

We're sharing and providing access to more government data via the CSIRO's Data61 unit.

We've reformed our insolvency laws to reduce the focus on penalising and stigmatising business failure to better promote a culture of entrepreneurship and innovation.

We've extended the crowd-sourced equity funding to proprietary companies.

It's a broad-ranging package — and I've only just skimmed the surface.

The critical point is that the franchising sector, including existing operators, stand to benefit.

You have the right structures in place and — from what I've seen — the enthusiasm to innovate.

Some 60 per cent of franchise brands have been around for more than 10 years.[6]

That says something — you have a consumer focus and the ability to adapt and move with the times.

Digital

And it's the time of the fourth industrial revolution, according to consultancy firm McKinsey.

In the area of retail, McKinsey says:

Digital has the potential to transform each step of the retail value chain, from sourcing, distribution, logistics, and instore operations, through to the customer-facing areas of marketing, omnichannel consumer experience, and ongoing consumer engagement.[7]

In summary, you could say most aspects of franchising.

The headline finding from McKinsey was that 'Australia's digitisation is uneven and still a distance from its full potential.'

We're aware of that and we're taking action.

Last month, the Government issued a consultation paper inviting comment on revamping our digital economy.[8]

The strategy will focus on ways governments, businesses and the community can seize the benefits of digital transformation.

This includes improving access to new and emerging technologies and digital infrastructure to grow Australian industry and jobs.

The reality is that we risk slipping behind the rest of the world in digital readiness, especially in growing digital businesses.

Australia is now ranked 18th on the World Economic Forum's Network Readiness Index, slipping two places from the previous year.[9]

So your input on creating a digitally sophisticated Australian economy is most welcome.

Cybercrime

There are many benefits in digitising small businesses.

Deloitte's Access Economics found that 'digitally-engaged small businesses create more jobs.'[10]

It said small businesses that reach 'advanced' levels of digital engagement are:

  • 1.5 times more likely to be growing revenue, and
  • eight times more likely to be creating jobs

compared to those that have 'basic' digital engagement.[11]

While the digital economy delivers much good, there's also a dark side in the form of cybercrime.

Dan Tehan, Minister Assisting the Prime Minister for Cybersecurity, has written a great piece in the current edition of your Franchise Review Magazine.[12]

He said it's undeniable that cyber threats are evolving and growing at a rapid pace with 47,000 reports of cybercrime in Australia last financial year alone.

The WannaCry and Petya ransomware campaigns have driven home the reality that cyber criminals can and do cause widespread and indiscriminate damage, including to Australian small businesses.

However, as the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, said just about every business with a physical shopfront has an alarm and takes security precautions, but not every business is aware of cyber security.

Today marks the beginning of 'Stay smart online week'. The theme for this year is 'simple steps to online safety'.

Technology is a driver of businesses expanding and taking advantage of the opportunities that the online world can provide.

In this rapidly changing online world small businesses need to be equipped to manage the challenges that cyber criminals and syndicates pose.

It's clear that prevention is better than cure.

That's why we will provide grants of up to $2,100 to co-fund small businesses to have their cyber security resilience tested by CREST ANZ-approved service providers.[13]

We are also running a five-part series of webinars on cyber security. I invite you to sign-up to the next one which will focus on developing an effective incident response plan.

Vulnerable workers

Rules and regulations also make up your operating environment so it would be remiss not to mention the new laws around protecting vulnerable workers.

As the Minister for Employment, Michaelia Cash, said when the legislation passed the Senate: 'our Bill not only supports vulnerable workers, but also ensures businesses are operating on a level playing field.'[14]

I want to reiterate that the Government recognises that franchising in Australia includes a diverse range of businesses.

That's why the laws do not impose a one-size-fits-all requirement for franchisors.

What is reasonable will depend on factors such as the size and resources of the franchisor.

Liability for underpayments will apply to franchisors that have a significant amount of influence or control over the affairs of the franchisee.

Importantly, franchisors could be liable for breaches or underpayments if:

  • they knew (or ought reasonably to have known) that a franchisee or subsidiary wasn't following workplace laws; and
  • they didn't take reasonable steps to prevent it.

I appreciate that these new laws have raised some concerns among the franchise community.

But the Government was concerned to ensure, not only that vulnerable workers are protected from exploitation, but also that the vast majority of businesses that do the right thing are not undercut by those employers willing to exploit workers to gain a competitive advantage.

As you've heard today, the Fair Work Ombudsman is ready and willing to assist any business that wants to understand how the new laws affect them.

Smarter government services

The final area I want talk about involves providing smarter government services.

It's an area where we're looking to lift our game on several fronts.

Data

First, we realise that data provides the building blocks or the key to unlock better policy outcomes, and improve services for all Australians.

Earlier this year, the Productivity Commission handed down its final report on Data Availability and Use.[15]

It found 'governments across Australia hold enormous amounts of data, but mostly lag behind other comparable economies' in using it or allowing others to use it.

In reply to the wide-ranging recommendations, we've set up a cross-agency taskforce to produce a whole-of-government response.

We anticipate finalising this process by the end of this year after feedback from all levels of government, stakeholders and the public.

Open banking

Stemming from the Productivity Commission's data review and other inquiries we've commissioned an independent review to investigate the best approach to implement an open banking regime in Australia.

Open banking is about giving Australians greater access to their own banking data and has the potential to transform the way in we interact with the banking system.

It's a good example of government acting as a catalyst for change.

Transformation

Secondly, we've set-up the Digital Transformation Agency to make it easier for you to deal with government.

It's a massive task when you consider that there are 811 million transactions per year across all government websites.[16]

As the chief of the agency, Gavin Slater, said there are over 44 million pages of web content on federal government sites, and about 1,200 federal government websites.

He said that if you're trying to deal with government and you want to find out basic information and get things done, it's not always easy.

Red tape

But we are making inroads in our crusade against red-tape.

In fact, we've cut $5.8 billion in energy-sapping red tape since coming to office, but there's more work to do.

For example, we recently started road testing a new service to make registering a business easier and faster.

The new business registration service allows businesses to apply for multiple business and tax registrations at the same time online at business.gov.au.

This has reduced the average time taken to register for an ABN from over an hour to less than 15 minutes.

In another example, under the banner of the National Business Simplification Initiative, we've joined forces with the NSW Government to reduce the time it takes to start a café, restaurant or small bar.

And I'm pleased to say we've had success — by delivering better digital services and streamlined regulation we've reduced the start-up time from 18 to three months.

Another success story involves a simpler BAS solution.

The ATO has developed the simpler BAS to deliver small businesses time and cost savings associated with GST bookkeeping and reporting from 1 July 2017.

I'm sure this is music to your ears.

The Government recognises that states and territories continue to impose a wide range of regulatory restrictions on small businesses.

So in this year's Budget, we set aside up to $300 million to encourage the state and territory governments to further remove regulatory burdens on small businesses.

Closing remarks

So on that point, let me wrap up.

I'd like to thank the Franchise Council of Australia for hosting the convention.

As I've come to expect, the discussion and range of issues covered at this event is first-rate.

You're asking the big questions — the right questions — how can you make franchising smarter?

To be honest, I think you're already pretty close to the pin.

In many ways, franchising is the epitome of innovation — you're the masters of taking a good idea and making it sing.

Thank you.


[1] http://www.thebfa.org/about-franchising/the-history-of-franchising

[2] National Australia Bank, Moments that matter: Understanding Australian SMEs http://news.nab.com.au/news_room_posts/moments-that-matter-a-smile-sets-the-world-apart-for-australian-smes/

[3] http://www.fergusonplarre.com.au/tiddly-oggie-history

[4] National Australia Bank, Moments that matter: Understanding Australian SMEs

http://nabnews.efront-flare.com.au/wp-content/uploads/2017/06/J002580_MTM-Whitepaper-IPSOS-v4_C1.pdf

[5] http://www.innovation.gov.au/page/national-innovation-and-science-agenda-report

[6] Griffith University & Franchising Council of Australia, Franchising Australia 2016

[7] McKinsey Digital Australia: seizing the opportunity from the fourth industrial revolution,

[8] Department of Industry, The Digital Economy: Opening up the conversation, September 2017 https://industry.gov.au/innovation/Digital-Economy/Documents/Digital-Economy-Strategy-Consultation-Paper.pdf

[9] ibid

[10] Deloitte Access Economics Connected Small Business 2016 https://www2.deloitte.com/au/en/pages/economics/articles/connected-small-businesses-google.html

[11] ibid

[12] Franchising Council of Australia The Franchise Review http://thefranchisereview.realviewdigital.com/#folio=8

[13] https://www.business.gov.au/assistance/cyber-security-small-business-program

[14] Minister Cash media release 'Turnbull Government delivers stronger protections for vulnerable workers' 4 September 2017

https://ministers.employment.gov.au/cash/turnbull-government-delivers-stronger-protections-vulnerable-workers

[15] Productivity Commission Data Availability and Use 2017

https://www.pc.gov.au/inquiries/completed/data-access#report

[16] Slater.G Address to CEDA, September 2017

https://www.dta.gov.au/news/ceda-speech/