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Late last week the Federal Government finally responded to the recommendations handed down on 1 December 2008 by a Federal Parliamentary Inquiry chaired by Queensland Labor MP, Bernie Ripoll.

After almost a year of waiting, the sector was disappointed that Minister Emerson’s response amounted to little more than window dressing with yet another franchising inquiry to be established.

In fact, Minister Emerson's response fell well short of what's needed to clean out the rogue franchisors that prey on vulnerable franchisees. In doing so, Minister Emerson has missed a golden opportunity to put an end to the rogue franchisors that continue to give the whole franchising sector a bad name.

Sadly for the sector, the Minister’s response was big on rhetoric and failed to implement two key recommendations from the Ripoll Inquiry relating to good faith and pecuniary penalties for breaches of the Franchising Code.

By failing to implement a statutory duty of good faith, the Minister is allowing rogue franchisors to get away with unethical and unscrupulous behaviour that is causing so much pain and loss to franchisees.

Good faith is a well understood concept accepted by Australian courts. It is also a concept long accepted in European contract law.

At its simplest, the concept requires that franchising participants act honestly, reasonably and cooperatively towards one another. Good faith is integral to good franchising and it's disappointing that the Minister has failed to recognise the link.

Given that Australian courts have accepted that franchise agreements are governed by an common law “implied” duty of good faith, all that Minister Emerson needed to do was to amend the Franchising Code to say that "the common law requirement of good faith applies in relation to franchising agreements covered by the Code" or that "nothing in the franchise agreement limits any common law requirement in relation to a franchise agreement covered by the Code."

Since a franchise agreement can be drafted to prevent the operation of an implied common law duty, such an amendment would prevent rogue franchisors from seeking to contractually exclude the common law duty of good faith.

Importantly, the amendment would also highlight the link between good franchising and good faith in dealings between franchising participants.