Speaking ahead of Business Development Alliance franchising conference in Perth next month Mr Penman said what was happening in the sector was “shocking” and he labelled the current franchisor code of conduct “pathetic”.
“It’s pathetically weak and useless. The only good thing I can say about it is it gets franchisors to give a list of franchisees to prospective franchisees,” he said.
“But I know quite well that some franchisors completely ignore that, they won’t even give it and nothing happens to them.”
“I think [the taskforce] will do nothing,” he said.
“It’s too feeble and it’s based on lawyers and complicated things.”
Mr Penman, who confessed his surprise that someone as “dumb” as him could succeed in business, lamented the legal jargon that riddled the sector.
“The so called disclosure document … my own franchising lawyer – she’s been my lawyer for several years – and she said she would struggle to understand it,” he said.
“How is the individual supposed to understand it?
“I’m not in huge favour of government intervention in most things, but giving people proper information, there is nothing wrong with that.
“Franchisees have to be empowered. The franchisor is too powerful. When I was starting this thing I spent nine months arguing with lawyers about how they wanted me to take more power.
“I said I wanted a contract that I’d want to sign if I was a potential franchisee.”
Jim’s Group has not been without controversy, but Mr Penman proudly says he has only been to court three times in his 30 years, which he puts down to a different attitude towards franchising.
“One of the issues you often have is people being forced to buy products from the franchisor,” he said.
“We have an absolute policy that we don’t require that except for one thing, which is public risk insurance.
“Our franchisees we treat like clients. They can vote out their franchisors by an anonymous confidential referendum.
“We have a simple clause in our contract that says if you pay us $4000 you can go independent. Anybody can do it and often we don’t even charge that.
“People think that’s radical bolshy stuff but we’ve been using this system successfully for decades. It hasn’t damaged us; in fact I reckon it’s helped us.
“You shark somebody now you might make a few thousand bucks … but reputation spreads. People don’t want to deal with you, they don’t want to stay with you.”
Ultimately franchisees have a choice however, and Mr Penman said it wasn’t a business model for everybody.
“If you haven’t got a grain or sense or initiative then don’t do it. It’s a very simple proposal,” he said.
“Get hold of a list of all the current franchisees and franchisors and ring as many as possible. Simple.
“You’re going to spend minimum $25,000 up to $500,000. Uou should have two hours to do a bit of homework.”
Hamish Hastie is WAtoday’s business reporter.