Franchise Council of Australia Ltd ABN 17 002 789 988 And ...Franchise Council of Australia Ltd ABN 17 002 789 988 and Controlled Entities 4/36 When I talk about success in franchising,

Franchise Council of Australia Ltd

ABN 17 002 789 988

And Controlled Entities

Franchise Council of Australia Ltd ABN 17 002 789 988 and Controlled Entities

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CHAIRMAN’S MESSAGE

In last year’s annual report, I wrote that there had never been a better time to be in franchising. Economic conditions were favourable, conflict was low, and all participants in the sector – franchisors, franchisees and suppliers—were prospering. This year the story is a little different. . We are in the midst of what looks like the franchising version of a perfect storm. Economic conditions are deteriorating, financial markets are in disarray, interest rates and petrol prices are high and consumer confidence is weak. We have suffered franchise system failures. Conflict is rising – or at least that is the way some people are describing it.

We have had changes to the Franchising Code of Conduct, two State-based inquiries into franchising and now face another federal inquiry to follow on from the Mathews inquiry in 2006/07. Add a Productivity Commission report into retail leasing and a contentious court case, which was serious enough to be considered by the High Court, and you get the picture of the storm clouds massing. But is it indeed the perfect storm, with its catastrophic consequences? My answer is no. My belief is that as we enter 2009, franchising will maintain the resilience and optimism that has seen it safely through the storms of the past.

Franchising in Australia, 2008, is a sophisticated business sector, built on strong foundations. Not only will it weather the storm, history suggests it may well do relatively better than other business sectors should the pessimist view prevail and we enter serious economic recession. Already in the second half of 2008 we have seen signs of tight trading conditions sparking business consolidation which has been of benefit to successful franchise brands – in financial services and other sectors.

This year the Franchise Council of Australia celebrates its 25th birthday. In that quarter of a century, we have had three major stock market collapses and three recessions. Franchising has been growing throughout. The biggest dip in franchising growth occurred in 1998 when the mandatory Franchising code of Conduct was introduced. So it was not economic recession which had the biggest impact on franchising, but the imposition of regulation which investors feared could impede the sector. This is a fact we expect the Federal Government will bear in mind as it considers whatever recommendations may emerge from the inquiry currently being conducted in the Commonwealth Parliament by the joint standing committee on Corporations and Financial Services.

We also expect the Government will take note of the many positive changes which have occurred in the sector in the past year, including those initiated by the Franchise Council of Australia. The FCA is the sector peak representative body – and has been for the past 25 years. It is the only body to represent the views of franchisees, franchisors and suppliers – a key factor in ensuring that all participants operate co-operatively, rather than as adversaries.

I said a year ago that despite the good times, franchising could not afford to rest on its laurels. It needed to evolve and improve. To be more inclusive. Inclusiveness became a driving theme and it was embraced vigorously by the board of the FCA in late 2007 and 2008. The Board has moved to give voice to representatives of each of the groups in addition to franchisors and State presidents. It has created representative forums for franchisees, suppliers and women in franchising, and given a voting seat to each on the board. It has also added a seat for a director charged with guiding education policy within the sector. There have been key initiatives in each of these Forums, which are detailed in the Executive Director’s Report.

Each of these groups is equally important to the growth and development of franchising and the FCA, but it is undoubtedly the Franchisee forum which has grabbed most attention – from inside and outside the FCA membership.

Franchisees now have not only formal representation on the board, but a number of additional benefits. Franchisees are entitled to free membership of the FCA if their franchisor is a member. They are entitled to dramatically reduced prices to attend our showcase education and business networking event of the year, the National Franchising Convention (to be held in Sydney 16-18 October 2008).

Another important change is that educators also have a dedicated representative on the board. The FCA has identified education as a key to continuously improving standards in the sector, to the benefit of all. We have moved to formalize quality control and co-ordination of education service delivery across the sector, and we are taking new steps to try to reach more potential business people with the franchising message before they come to us. We are doing this because we think pre-entry education is an area of opportunity which has not been well explored in the past.


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Australia’s position in global franchising continues to rise. We play a leading role in communications in the governing body of global franchising, the World Franchise Council. This year we have taken steps to liberalise the Constitution of the WFC, to allow it to take a more active role in promoting global franchising, including the ease with which Australian systems are able to move into other markets around the globe. We are working with the American, Brazilian, British and Mexican franchise associations to drive this reform agenda, which has, at its root, the recognition that barriers to ‘free trade’ in franchising need to be broken down.

The FCA also continues to work with Austrade and other bodies to pave the way for more Australian franchisors wishing to expand internationally. This year we have assisted our sister organization across the Tasman to deal with a political push for new franchising legislation. This remains a work in progress, but the signs are positive that the New Zealand Government has recognized some of the opportunities of positive light-touch regulation as well as the risks associated with a heavy-handed approach which could create rules in conflict with those existing in Australia and other countries in the region, potentially harming the sector in NZ.

In closing, I would like to thank the many individuals who have worked tirelessly for franchising in the past 12-months, especially our army of volunteers: the Board, State Chapter Committee members, Special interest Committee and Forum Members and all the other our volunteers who give up their time to advance franchising in Australia. Thanks again for your support in what has been a dynamic and demanding year. Let’s hope 2009 is a prosperous one for us all.

John O’Brien

Chairman

Executive Directors Report

As I write this I have been in the job of Executive Director of the FCA for just on eight months. I feel like my feet have barely touched the ground. It has been a dynamic period in the sector, one of the most eventful in the FCA’s 25-year history. I am very pleased to be a part of it – and to be here as these important events are unfolding.

My impression is that in years to come, this is a period which will be looked upon as defining for franchising in Australia – in terms of its maturing nature within Australia and it’s blossoming outside our national borders.

Having listened to reports and discussions among franchising leaders at this year’s Asia Pacific Franchise Confederation and World Franchise Council annual meetings, it is evident to me that Australia is a clear leader in the region and at the forefront of the sector globally. The sophistication of the Australian regime is unmatched elsewhere in the world, including the US. As a result, the success of our franchising sector, on a per capita comparison, is at the top of the global leader board. This year our export activities increased dramatically, providing further proof of the health of the Australian sector. We are now exporting our expertise and innovative knowhow to many markets in Asia, Europe, the Middle East and the United States.

In the short time that I have been in the job, Australia has twice been called upon to lend a hand in other nations where questions of the best way to structure a franchising sector have been raised. It may be a surprise to learn that one of the countries which called for the help of the FCA was New Zealand -- a near neighbour which could easily have made its own observations about the Australian franchising system, but decided instead to ask for some help and advice. Of course the call was willingly answered, with expert advice provided by FCA chairman John O’Brien and former chairman Stephen Giles.

John and I participated in a consultation session with ACCC chairman Graeme Samuel and two New Zealand Government Ministers at a critical time in the legislative decision making process. Stephen has provided ongoing advice and support as the process of review has continued in NZ. The process is not yet concluded, but the result of the co-ordinated response to Government by the FCA and the Franchise Association of New Zealand was that a push toward a regressive ‘solution’ was nipped in the bud. Legislation at odds with the Australian approach and likely to cause difficulties within NZ and for Trans Tasman franchising ‘trade’ (in both directions) was avoided. The FCA assistance was acknowledged by the FANZ at the August World Franchising Council meeting in Kuala Lumpur, Malaysia. The WFC meeting was hosted by the Malaysian Franchise Association, which was addressed by Malaysia’s Deputy Prime Minister – and former ruler – Dr Mahatir, who talked enthusiastically of the role of franchising in developing business in Malaysia and other countries in the region.


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When I talk about success in franchising, I often refer to companies like Gloria Jeans Coffees, Fernwood women’s gyms, Cartridge World and Ecowash Mobile, all of which have done extremely well in Australia and are now rapidly expanding overseas. In the case of Gloria Jeans Coffees, the Australian owners started as franchisees to American owners, then took over the Australian master franchise, then moved into the US market and convinced the American owners to sell out. Having started out as franchisees, those owners are now running a brand operating in 20 countries, headquartered in Australia. FCA director Diana Williams started Fernwood in a council-provided disused hall in Ballarat. It was years before she was able to convince banks to lend to her the money she needed to execute her expansion plans. Now, approaching two decades later, Fernwood is one of the world’s most successful women only gymnasium systems and is set to expand into India.

These are the stories of success that continue to inspire new and existing franchise entrepreneurs in Australia – and overseas. It is the spirit, endeavour and innovation seen in spades in the franchising awards program run each year by the FCA – and as of this year, with the much appreciated financial support of MYOB. One thing I have learned in my first year in the FCA is to remember and continue to focus on the really exciting achievements in franchising and to grab the opportunities for improvements as they arise. As in many aspects of life, it can be all too easy to focus on the negative – the squeaky wheel; the sad story which gets attention because it is genuinely sad, but which is not necessarily representative of an endemic issue in the way some choose to represent it.

The latter is a position in which I have found myself several times this year – at franchising inquiries in Western Australia, South Australia, and I expect will soon find myself in again in the forthcoming federal inquiry, being undertaken by a Commonwealth Parliamentary Committee. The Chairman of the ACCC did a very unusual thing earlier this year. For the first time, to my knowledge, in his reign at the head of the ACCC, Mr Samuel personally announced the finding of a long-running investigation into a major Australian franchise brand in the retail sector. In doing so, Mr Samuel declared that what the investigation had showed was that where there was smoke, ‘...there is not always fire.’

Mr Samuel’s comment may well be an allegory of much that is discussed in the wake of the WA and SA inquiries, where a litany of accusations were levelled against Australian franchise operators. The good news was that in both inquiries, the FCA was successfully able to promote education as the most effective agent of improvement in the sector. Making potential franchisees more aware of the particular challenges of franchising, the roles and obligations of the various participants and the importance of due diligence before one starts is now a major focus for the FCA. In fact, education efforts have been ramped up in many areas in 2008, with the result that we now have education partnerships with all the major education service providers in the sector. As a result of this and other activities, including increasing the breadth of franchising educational courses, the FCA Academy has had a much improved year and has made a modest operating surplus.

The Academy surplus helped ameliorate the impact of the extraordinary loss for the FCA brought about by the financial impact of support for the Ketchell High Court case. The Ketchell case was a major issue for the FCA in 2008 – according to some the biggest legal case to hit franchising in the past 30 years. After considerable deliberation, the FCA decided to support an appeal to the High Court to seek clarification on a NSW Court of Appeal ruling that a franchise agreement was illegal if a breach of clause 11 of the Code of Conduct occurred.

The FCA’s concern was that this ruling could be used for opportunistic litigation against franchisors or franchisees that could be found to be in breach of the Code. The High Court ruling delivered just what we had sought – a clear direction that a code breach did not invalidate a franchise agreement and those remedies to breaches should be found under the Trade Practices Act, as has been the practice for many years. Proceeding with this appeal cost the FCA $225,000 – a major expense for a member-funded not-for-profit organisation. Most members seem to agree it was money well spent.

Two court cases in NSW which would probably have cost the participants upwards of $300,000 will now no longer proceed. This is restoration of stability delivered at a fraction of the cost of even a handful of cases, when the reality is that, unchallenged; the NSW Court of Appeal ruling might have indirectly prompted scores or even hundreds of opportunistic cases.

Another very positive development in 2008 was the emergence of some real momentum for change in retail leasing rules. The FCA made a strong submission to a Productivity Commission inquiry, some of the principles of which have been adopted in a NSW Government policy initiative and in a Federal Government response to the Productivity Commission. The Commission complimented the FCA for its constructive contributions to the debate about a fairer deal for tenants in major shopping centres. It said it saw merit in adopting some of the principles of the Franchising Code of Conduct in the retail leasing area – a concept which has now been picked up by NSW and Federal Governments. There is now a prospect that after years of inability to crack the nut, we may find 2009 heralds a period of some useful change to the benefit of franchisees in major shopping centres.

The State and Federal franchising inquiries, the Ketchell case and the Retail Tenancies issue are among a large number of representative issues undertaken by the FCA in 2008. With a new Board structure facilitating a strong voice for special interest groups within our membership, we have a number of areas of representative initiative, as well as that which is focussed on direct member services or benefits. The following details some of the highlights:


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Franchisee Forum (chair Tony Melhem)

The Franchisee Forum came together for the first time in 2008, having been formed in 2007. Tony Melhem got the ball rolling with a survey of franchisees aimed at getting a quantified understanding of the issues of most concern to franchisees. The Franchisee Forum, made up of representatives from each State, convened to review the survey results and consider a response plan. That work has continued through the year and lead to the introduction of new franchisee focussed initiatives which will be implemented at the FCA’s 2008 national conference, to be held in Sydney 16-18 October. For the first time, franchisees will have dedicated conference streams on both days of the conference. There will also be forums for franchisee leaders and award winners. Conference prices have been drastically reduced for franchisees to encourage them to attend the conference. The FCA has also crafted cut-price offerings to franchisors to encourage them to bring franchisees to the conference.

Women in Franchising Forum (chair Vicki Prout)

The WIF Forum had a great year in 2008, staging events around the nation which were the best attended women’s events ever in franchising in Australia. New chair Vicki Prout injected some renewed energy into the WIF Committee and into the FCA generally! The most high-profile events in the WIF calendar were the national road show events featuring Franchising Woman of the Year Karen Matthews, the Chief Executive of Ella Bache. Karen’s presentations were sincere, insightful and inspirational for all who turned out to see her tell her story and the story of Ella Bache. The WIF Forum will also have discreet sessions at the FCA national conference this year, as well as having franchising women participating throughout the general conference program. More initiatives are planned for 2009.


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Supplier Forum (chair Phil Blain)

The Supplier Forum was created in 2008 in acknowledgement of the significant role played by service providers and suppliers to the primary franchising relationship between franchisors and franchisees. The Supplier Forum has set itself a number of policy priorities which it plans to pursue in 2009. The priorities are aimed at lifting standards of advice in the franchising sector, through standards, education and training. A focus will be the possible development of an accreditation regime which would require standards be met and capabilities demonstrated in order to gain accreditation within the sector. The existing professional development program run by the FCA will also be a focus of attention. PD point structures and requirements were amended in 2008 to ensure that members in the less populous States were not disadvantaged by the lesser frequency of PD events when compared to numbers in Sydney, Melbourne and Brisbane. The Supplier Forum is also looking at possible partnerships with associations similar to, or sharing common ground with the FCA.

Legal committee (chair Stephen Giles)

The major issues for the legal committee in 2008 were the Ketchell case, the introduction of the amendments to the Franchising Code of Conduct and the Productivity Commission inquiry into Retail Leasing. As I have already mentioned the other issues, in this section I will concentrate on the Code amendments. But not before noting the outstanding contribution of FCA director, and former chairman, Stephen Giles, of national law firm Deacons. Stephen’s efforts added a marked professionalism to the FCA’s presentations in the context of the Ketchell case. The quality of his work in identifying the relevant aspects and defining the important issues was so impressive as to be remarked upon by the High Court as it made its decision to hear the case. Stephen’s reputation and ability to negotiate successfully with both the franchisor and the franchisee in the Ketchell case meant that the case was able to proceed with maximum efficiency and cost control and minimum exposure for the franchisor and franchisee in the case. Other members of the legal committee offered help on the case as well and at least two member firms offered to contribute pro bono assistance in running the court case – offers which were most appreciated.

The legal committee’s major focus late in 2007 and in early 2008 was ensuring that the FCA provided good guidance to members about the impact of the new Code requirements, being implemented on 1 March. Again Stephen Giles and Deacons chipped in with the offer of a ‘free first call’ for members unsure of the impact of the Code changes. The task now at hand is an important one – that of providing feedback to Government and the ACCC on the unintended consequences of the Code changes. The aim is to ensure that any rough edges are smoothed out at the first opportunity. However, given that a review of the Code has been mooted for 2010, it is possible that any non-urgent issues may be left until then for a drafting solution. With this possibility in mind, the FCA pioneered a FCA-ACCC working approach to try to reach an understanding on how the ACCC would respond to what could be considered unintended consequences. While not providing protection from any decision by the ACCC to take action on potential breaches of the Code amendments (which are focussed on tightened disclosure requirements), the ACCC working approach should provide some comfort to franchise operators. At the time of writing, this remains a work in progress.


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Ethics Committee (chair Stephen Giles)

The Ethics committee considered a number of complaints in 2008. It referred one to the Board and, at the time of writing, that matter was still current. The committee’s deliberations are confidential, and, in most cases, the outcomes remain known only to those involved.

Western Australian State Chapter

The WA Chapter is pleased to report another stellar year. The strong performance of WA’s fast-growing franchise sector has been highlighted with the news that no less than 16 WA-based businesses have been nominated for the top prize at this year’s MYOB Excellence in Franchising Awards. The impressive tally of WA nominees for the prestigious Franchisee of the Year Award represents a 100 per cent increase on last year’s number.

This year WA has seen the unusual event of a major successful franchise brand closing its doors and erecting a fence around its KFC store in Rockingham. This store was run as a franchise operation by Competitive Foods – also the owner of the nationwide Hungry Jacks franchise chain. The store closure was the result of a dispute between Competitive Foods and its KFC franchisor, Yum Foods International. This is a dispute which has formed a backdrop to a nationwide push by Competitive Foods for a change to the law regarding the ownership of goodwill and the rights of a franchisee at the end of term. This is a matter of great interest in WA and was a central issue in the WA inquiry into franchising.

The WA inquiry found that franchising was in good health in WA and that there was no need for a change to the law in WA. The inquiry concluded that any change to goodwill or ‘good faith negotiations’ should be addressed at the national level, a position advocated by the FCA in the WA inquiry. The FCA also strongly supported the WA inquiry finding that education of franchisees and franchisors about their obligations under the Franchising Code of Conduct was an essential part of improving outcomes in the sector and avoiding unnecessary disputes.

The State Conference held in Perth this year was a resounding success. My appreciation is extended to our Conference sponsors Lawrence Business Management, Deacons and Westpac without whose contributions and support the conference would not have been possible. The overwhelming interest and participation in the conference has signaled clearly to us that these State based conferences should be an ongoing part of FCA activities.

Support from the National Office has been incredible and the high level of communication has positively impacted outcomes for our Members. I would like to mention a special word of thanks to outgoing FCA Chief Operating Officer, Chris Lowe. His hard work and interminable assistance to the State Chapter Committees is gratefully acknowledged and, while he will be sorely missed, we wish him the best of luck in his new venture.

Steve Hansen


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Victorian State Chapter

The Victorian Chapter has experienced another strong year in robust representation, leading edge education, business to business opportunities and membership services.

State events and roundtables are continuing to flourish and I take this opportunity to thank all the firms and individuals who have hosted these events and, of course, the Members who have shown unwavering support in their attendance and participation. This year’s Victorian State Conference was the most successful ever with attendance and participation of membership at all levels ensuring that it was an outstanding event. Our appreciation is extended to our State Conference Sponsors: Hall & Wilcox, The Yellow Envelope, Optimum Assurance Group and Tanner Menzies for supporting us in this important venture.

Whilst in past years liaison with Government personnel and regulators was handled exclusively by the CEO, this year has seen the introduction of State based contact with key State Government personnel and ACCC members. This initiative, which includes Executive Director Steve Wright, has allowed for an open and efficient channel of communication and will result in better, more targeted outcomes for our Chapter.

Member involvement in delivering education both to Members and to the broader community has increased and again I express my gratitude towards the Members for supporting this remarkable program. Obviously these initiatives auger well for the Chapter and this is already evident in our significant membership increase.

My wonderful hard working committee members (past and present) are to be congratulated and thanked for their time, effort and dedication. I would also like to thank the National Office for all their support and assistance over the past year.

2008/9 may bring slightly tougher times but it is my firm expectation that franchising will continue to be the shining light in business and I look forward to working together with you to ensure this.

Phil Blain

South Australian State Chapter

The South Australian Chapter has experienced a stellar year with active membership involvement and many successful and informative events held through the year. The Round Tables continue to be well attended and the wide ranging and relevant topics covered attract not only the State’s most influential business people but also provide for invaluable networking opportunities. Our gratitude not only to our members for their ongoing endorsement and attendance, but to our sponsors for their support in enabling these events to take place.

The Women in Franchising Seminar drew our largest crowd to hear the CEO of Ella Bache; Karen Matthews describe the achievements of her highly successful franchise brand and her own story as a business leader. We


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also had in attendance one of Ella Bache’s competitors, in the CEO of Essential Beauty, Tony Maiello, which again showed that in the franchising community, rivals are positive enough to talk openly about their businesses without feeling the need to attack or diminish competitors.

Franchisor education has been an important issue during the past year where we have seen franchise businesses gain a better awareness of Code of Conduct obligations through awareness of the Ketchell case. The Muffin Break case showed how expensive poor record keeping and unreliable staff can be. The South Australian chapter also addressed the importance of media training when franchisors were put on the spot at an FCA lunch, with impromptu interviews by a ‘non-working’ TV crew showing the participants and the audience the difference proper preparation can make in media interviews.

My grateful thanks go to my hard working committee members who have contributed so much time, effort and dedication to making this a successful year. I would like to take this opportunity to welcome our new committee members. We look forward to making 2009 another memorable year for the South Australian Chapter.

Alan Branch

Queensland State Chapter

The Queensland Chapter have celebrated another successful year. This year we have continued to embrace the concept of “inclusiveness” and ensure that our activities and services benefit all parties in the franchise sector.

The Ketchell Case has obviously made a huge impact on our industry and the ramifications of this case are of serious significance for the franchise sector Australia-wide. The WA and SA inquiries into franchising have also dominated headlines and have led to some State Government involvement in franchise activities with the Federal government announcing yet another inquiry into franchising, this time to be conducted by the Federal Government's Parliamentary Joint Committee on Corporations and Financial Services.

New franchise concepts continue to enter the market, including previously non-franchised sectors, multi-unit franchisees and exciting acquisitions and alliances. This bodes well, not only for the franchise sector but for the broader community and we are proud to be a part of this growth area. Strength in the franchising industry can also be gauged by the success of our State Conference and 2008 was undoubtedly the best Conference we have had to date with support and participation at an all time high. I take this opportunity to thank our State Conference sponsor, The Yellow Envelope whose support was an integral part of our success.

My appreciation is also extended to the National Office whose constant development benefits not only the State Chapters but flow on to benefit the industry as a whole.

After five years as President it is now time for me to stand down and I take this opportunity to express my sincere thanks and appreciation to the Queensland Committee, past and present, for all their hard work and tireless dedication. The role of President of the Queensland Chapter will be fulfilled by Ralph Edwards. Ralph has had extensive experience in the franchise industry and under his guidance the retail chain Bright Eyes Sunglasses has made the BRW Fast 100 for two consecutive years and also placed in the top 50 franchises listed in the BRW Fastest Growing Franchises. I am sure that under Ralph’s direction the Queensland chapter will continue to grow and thrive.

Philip Ciniglio


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New South Wales State Chapter

The NSW Chapter has continued to experience great success with its Round Table program. This year has seen

the biggest and best events with outstanding support delivering exceptional events and outcomes for our

Members. My thanks go to those Members who have given of their time and expertise to ensure that these events

remain educational and productive and are of the highest calibre.

Our breakfast events have also been extremely well supported with attendance at an all time high. Our breakfast

speakers have discussed the latest breaking events in franchising and participants have been provided case

studies presented by the franchisors themselves on the development of a part, or all, of their systems. Each of

these events has created not only remarkable learning opportunities, but has also allowed for tremendous

networking in the franchise sector. Again I extend my gratitude to the many volunteer panelists and speakers who

have bared all for our benefit thereby ensuring the unrelenting development of a vital, strong and financially viable

franchise sector.

Finally I would like to acknowledge and express my appreciation for the amazing contribution of the NSW Chapter

Committee Members who have volunteered their time to support all FCA activities in New South Wales. Our

Committee Members have continued to arrange events that are not only topical and relevant to our sector but also

promote the role of franchising to the wider community.

Ken Rosebery

National Alliance Partners

Without the tremendous support of its National Alliance Partners, the FCA would not be able to deliver the same

outstanding results to its Members. On behalf of all the State Chapter Committees the FCA extends its

unequivocal gratitude to National Alliance Partners:

• Charter Security

• CARE Super

• Franchising and Business Opportunities Expo

• PacNet

• Whirlwind

• Willis


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NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the 25th ANNUAL GENERAL MEETING of Franchise Council

of Australia Ltd will be held at 4.15PM on 16th October 2008 at Sydney Convention & Exhibition

Centre, Darling Harbour, NSW.

AGENDA

1. Apologies.

2. To receive and adopt Minutes of the 2007 Annual General Meeting.

3. To receive and adopt the Chairman's Report.

4. To receive, consider and adopt the financial report of the company and of the economic entity for the year ended 30 June 2008 and the reports by directors and auditors thereon.

5. To confirm appointment of Directors.

By Order of the Board

6. To appoint Auditors.

7. Consideration and adoption of Constitutional Amendments.

Stephen Wright

Secretary

19 September 2008


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DIRECTORS’ REPORT

Your directors present their report on the company and its controlled entities for the financial year ended

30 June 2008.

Directors

The names and particulars of directors in office at any time during or since the end of the year are:

John O'Brien B.A., AFE. 51. Chairman of the FCA since November 2006. Member of the Executive Committee. Past President of the Qld Chapter (1992-1994). Elected as an Independent Director in 2002. Board member since 2002. CEO of Poolwerx Corporation.

George Yammouni B.Bus.Stud., CPA. 50. Deputy Chairman and Finance Director. Member of

the Executive Committee. Immediate Past President of Victorian State

Chapter (2003 to 2006). Board Member since 2003. Elected as Independent

Director in 2006. CEO of Bathroom Werx.

Stephen Giles B.Ec., LL.B. 50. Director. Fellow of the Franchise Academy. Immediate past

Chairman. Member of Executive Committee, Chair of Ethics and Legal

Committees. Board Member since 1997. Partner with Deacons Lawyers.

Chris Malcolm 51. Director. Board member since 1994. Past Director of FCA, Deputy Chair

1995-1996, Chairman 1997. Member of AICD (Australian Institute of

Company Directors) and Hall of Fame inductee. Founder and Managing

Director of Clark Rubber Franchising.

Philip Ciniglio AFE, Ass Dip Mkt, GAICD. 57. Director and President of QLD State

Chapter. CEO of Franchised Music School, Accredited Franchise Mediator

and representative for franchising on the Queensland Government Small

Business Advisory Council.

Ken Rosebery M.B.A. 49. Director and President of NSW State Chapter. Board member

since 2005. CEO of Fastway Couriers (Australia) since 2002.

Phil Blain AFE, MIMC, Dip Bus (Franchising). 56. Director and President of Victorian

State Chapter. Board member since October 2006. Chairman of Franchise

Alliance.

Alan Branch LL.B, B.Ec., TA, Notary Public. 47. President of SA State Chapter, Member

of Ethics Committee. Board member since May 2007. Partner with

Donaldson Walsh.

Stephen Hansen Dip. Bus (Franchising). 55. Director and President of the WA State Chapter.

Board member since 2003. Managing Director of Chooks Fresh & Tasty.

Diana Williams Board Appointed Representative, 63, Women in Franchising. Board Member

since October 2007, Director of Fernwood.

Tony Melhem MMA, BA-Comm. Director & Chairman of National Franchisee Forum. Board

Member since October 2007, FCA ‘Franchisee of the Year’ 2005-06.Gloria

Jeans Franchisee.

Rod Wakefield BA BEd MBA, Chairman, Education Committee, CEO of The Coffee Club

Group, Board Member since October 2007

Steve Wright B. Bus, 46, FCA Executive Director, 46, Board Member since February 2008

Noel Carroll B.Sc. 56. Director and Board member since 2004. Non Executive Director of

John Brennan Hair. Resigned Board Meeting 11th October 2007

Richard Evans B.A. 55. Director and CEO of the Franchise Council of Australia. Former

franchisee, federal politician, management consultant, corporate manager

specialising in business development and media. Resigned Board Meeting

10th August 2007

Directors have been in office since the start of the financial year to the date of this report unless otherwise

stated.


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DIRECTORS’ REPORT

No director has an interest in any contract or proposed contract with the company declared since the last

Directors’ Report, except as detailed in Note 21 of the Financial Statements.

Company Secretary

The following person held the position of Company Secretary at the end of the financial year

Steve Wright Steve is a media and communications professional. Steve has held the

positions of Senior Executive with Gavin Anderson & Company, Director,

Stakeholder Relations, at Hutchison Telecoms, and Director of Public Affairs

for Optus and SingTel Optus.

Principal Activities

The principal activities of the economic entity during the financial year were:

— establish standards of international best practice in business format franchising for Australian

franchise systems;

— to provide information and education about franchising to existing and potential franchisees and

franchisors;

— to lobby state and federal governments on issues relevant to the sector;

— to develop a vital, strong and financially viable franchising sector;

— to advance the interests of members in Australia and in special interest markets such as the

international franchise community, Franchise Advisory Councils, Small Business Forums and

property leasing organisations (particularly shopping centres);

— to continually foster among consumers, governments and the business community, a broad-based

understanding of the economic importance of having a strong franchising sector in Australia; and

— to design efficient, identified, value-added services to members and assist them to be more

effective in franchising.

As the peak body for franchising, the FCA continues to add value to the businesses of its members by

providing a range of services relevant to franchising and which represent good value. The FCA recognises

that its members have different needs, and that different types of members should co-exist harmoniously.

The success of franchising depends on successful franchisors, and this in turn, depends on profitable and

happy franchisees. The Franchise Council of Australia works constantly to ensure that all activities and

services are for the good of the entire sector including franchisors, franchisees and service providers.

There were no significant changes in the nature of the economic entity’s principal activities during the

financial year.

Operating Results

The consolidated profit of the economic entity after providing for income tax amounted to a loss of $4,473.

Review of Operations

Member Development & Representation

The FCA continues to attract new members due to its status as the sector peak representative body – and

the only body to represent the interests of the sector as a whole – franchisors, franchisees and

advisers/service providers. The FCA is the co-ordinator of all mainstream education and professional

development services in the sector, as well as the only provider of member services including specialized

insurance broking.


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DIRECTORS’ REPORT

Franchise Academy Ltd

The FCA Franchise Academy continued to develop its programs during the year. The Academy has

expanded its service providers with the intent to develop a broader curriculum for the sector.

The Continuing Professional Development program is in its second year. The CPD program is designed to

elevate members’ professional standards and reputation in franchising and assist the broader business

community to identify experienced franchise professionals. It will enhance skills and knowledge and

encourage on-going individual professional development.

FCA Insurance Services Pty Ltd

Since its launch, FCA Insurance Services has saved numerous franchise systems thousands of dollars on

their insurance premiums. FCAIS is 100% owned by the Franchise Council of Australia and is for the

benefit of all members. It is an authorised representative of Willis Australia, one of the world’s largest

insurance brokers. FCAIS has shown a 163% increase in revenues from $21,060 in F2007 to $55,379 in

F2008.

Directors’ and Executive Officers’ Emoluments

Disclosure relating to directors’ and executive officers’ emoluments has been included in Note 5 of the

financial statements.

Subsequent Events

Stephen Wright was appointed to the position of Executive Director in January 2008. Chris Lowe resigned

from the position of Chief Operating Officer in May 2008 and departed in June 2008. Kym De Britt was

appointed to the position in August 2008. There has not been any other matter or circumstance occurring.

Future Developments

The entity expects to maintain the present status and level of operations and hence there are no likely

developments in the entities operations.

Indemnification of officers and auditors

No indemnities have been given or insurance premiums paid, during or since the end of the financial year,

for any person who is or has been an officer or auditor of the entity.

Dividends

The company is a company limited by guarantee. It does not have any share capital. The company has not

issued debentures. The directors of the company are precluded by the company’s Constitution from

recommending the payment of any dividend.

Options

The company does not have a share capital and no options to shares have been granted.

Environmental Issues

The company’s operations are not regulated by any significant environmental regulation under a law of the

Commonwealth or of any Sate or Territory.


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DIRECTORS’ REPORT

Meetings of Directors

During the financial year, the following meetings of directors (including committees of directors) were held.

Attendances by each director during the year were:

DIRECTORS’

MEETINGS

Finance

COMMITTEE

Executive

COMMITTEE

Number eligible to

attend Number Attended

Number eligible to

attend Number Attended

Number eligible to

attend

Number

Attended

John O’Brien - Chair

George Yammouni - D/Chair

Alan Branch

Phil Ciniglio

Stephen Hansen

Phil Blain

Ken Rosebery

Chris Malcolm

Stephen Giles

Dianna Williams

Tony Melham

Rod Wakefield

Stephen Wright - ED

Noel Carroll (Resigned Oct 2007)

Richard Evans (Resigned Aug 2007)

6

6

6

6

6

6

6

6

6

4

5

4

3

2

2

6

6

5

5

6

5

5

3

5

4

5

4

3

0

2

6

4

1

6

4

1

11

11

11

7

1

10

11

11

7

1

Proceedings on Behalf of Franchise Council of Australia Ltd

No person has applied for leave of Court to bring proceedings on behalf of the Franchise Council of Australia

Ltd or intervene in any proceedings to which the Franchise Council of Australia Ltd is a party for the purpose

of taking responsibility on behalf of the Franchise Council of Australia Ltd for all or any part of those

proceedings.

The Franchise Council of Australia Ltd was not a party to any such proceedings during the year.

Auditor’s Independence Declaration

The auditor’s independence declaration for the year ended 30 June 2008 has been received and can be found

on page 5 of the directors’ report.

Signed in accordance with a resolution of the Board of Directors.

John O’Brien Director Dated this 19

th day of September 2008


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The Board of Directors

Franchise Council of Australia Limited

Suite 6

307 – 313 Wattle Tree Road

MALVERN EAST VIC 3145

Dear Board Members

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration

of independence to the directors of Franchise Council of Australia Limited.

As the lead audit partner for the audit of the financial statements of Franchise Council of Australia Limited for

the financial year ended 30 June 2008, I declare to the best of my knowledge and belief that there have been no

contraventions of:

(i) the auditor independence requirements as set out in the Corporations Act 2001 in relation to the

audit; and

(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

DTT Victoria

R D D Collie

Chartered Accountants

Partner

Melbourne: 2008

DTT Victoria has changed its name from BDO and is a continuation of that Victorian partnership. The partners of DTT Victoria have also

joined the Australian partnership of Deloitte Touche Tohmatsu.

All changes with effect from 14 August 2006.

Liability limited by a scheme approved under Professional Standards Legislation.

DTT Victoria

ABN 96 080 779 423 180 Lonsdale Street

Melbourne VIC 3000 GPO Box 78B Melbourne VIC 3001 Australia DX 111 Tel: +61 (0) 3 9208 7000 Fax: +61 (0) 3 9208 7001 www.deloitte.com.au


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Documents

Franchise Council of Australia Ltd ABN 17 002 789 988 And ...Franchise Council of Australia Ltd ABN 17 002 789 988 and Controlled Entities 4/36 When I talk about success in franchising,