The American philosopher, George Santayana said, "Those who do not remember the past are condemned to repeat it".

Australia, according to the Franchise Council of Australia and other franchise pundits, is in the midst of a franchise boom. Franchise Expos are currently being run around Australia as further evidence of that boom.

However, if one looks carefully at the companies participating in these expos, there are few major franchisors. Will all the smaller companies exhibiting at these expos succeed? Statistical information says, most likely not. In fact, based on a survey carried out by IF International Group in 1995, after 10 years, 67% of all franchise chains started, were no longer in business.

There is an obvious argument that franchising has moved on and that franchisor failures are far fewer than in previous decades. Franchisor failures may well declined because of the franchise code and compulsory disclosure.

However, there has not been one recent survey specifically addressing franchisor failures and how much failures may have declined over, say, the last 10 years.

Potential franchisees should be asking themselves if Australia's 20 million people can realistically support the vast number of franchises in areas such

as:

Coffee Lounges

Mortgage Brokers

Finance Brokers

Wealth Management

Lawn Mowing, Maid Services and Dog Washing Franchise Consulting

I was the Southern Hemisphere's first franchise consultant and the only one in the country for 10 years, so I believe in the concept and the benefits that franchisees receive from ethical and well run franchisors.

However, I have lived long enough to be absolutely convinced that every boom is followed by a bust. The problem is that no one can predict when the bust will occur or who will go bust. Despite the benefits brought by the franchise code and disclosure documents, potential franchisees must always operate not on the basis of carpe diem, seize the day but rather on the basis of caveat emptor, buyer beware.

So, as George Santayana implied, potential franchisees should remember the past and be extremely careful when considering becoming franchisees of smaller, unproven franchisors. Unfortunately, not every franchise is the next McDonalds's, even though the promoters would like potential franchisees to think they are.

It’s a sad, but true fact that franchisees cheated by crooked franchisors or seriously disadvantaged when incompetent franchisors go broke, have very little chance of winning in court.

The Australian legal system mandates that solicitors instruct barristers with the simple result that those with the deepest pockets usually win. Australian lawyers don’t work on contingency, class actions are few and far between and Australian courts level only compensatory damages, not punitive damages.

Contrast this with the United Sates where aggrieved franchisees can hire  lawyers who get paid only if they win their cases, courts award treble punitive damages and class actions are easily brought.

Additionally, a crooked franchisor that mails misleading information has to deal with the FBI, because once fraudulent mail crosses a state border, the offense becomes federal.

Simply put, it’s easier to cheat franchisees in Australia than in America and it’s harder for a cheated Australian franchisee to win in court.

I have a suggestion to level the Australian franchisor/franchisee playing field. However, many honest and competent franchisors will be appalled by my suggestion.

Let me state my orientation. I have always worked exclusively with franchisors and principals and would never do anything to weaken their positions.

Having said that, here is my suggestion – State and/or the Federal governments should provide legal aid to wronged franchisees. If legal aid is

deemed acceptable for accused rapists and murderers, surely there has to be some place for it to help Aussie battlers.

I can hear franchisors now, “Franchisees are never happy, and if you give them legal aid we’ll spend the rest of our working lives in court.”

They will also say that the Australian Franchising Code provides for compulsory mediation. It does, and mediation often works. But, mediation is for honest, competent franchisors dealing with honest franchisees where there is a genuine commercial dispute, not stupidity or cupidity.

Obviously, there have to be mechanisms to ensure vexatious franchisee litigants don’t get legal aid. That mechanism can be vested in the ACCC or a similar organization with the skills to evaluate whether franchisees’ claims are valid and the power to appoint lawyers to provide legal aid.

While we may read about dishonest franchisors being sued by the ACCC or incompetent franchisors going broke, we rarely read about those people that lose their homes, their life’s savings and sometimes their sanity and their lives. We don’t hear about marriages breaking up under the strain of insolvency or about the sense of despair that comes about when good people have nowhere to turn.

At the very least, legal aid for cheated franchisees, should be trialed by a state or the Federal government.