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FRANCHISE COUNCIL OF AUSTRALIA | ANNUAL REPORT 2011 - 2012

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

ExECutivE DirECtor’s rEport

ChAirmAN’s mEssAgE

stAtE prEsiDENt’s mEssAgE - WA state Chapter

stAtE prEsiDENt’s mEssAgE - viC/tAs state Chapter

stAtE prEsiDENt’s mEssAgE - sA state Chapter

stAtE prEsiDENt’s mEssAgE - QLD/Nt Chapter

stAtE prEsiDENt’s mEssAgE - NsW/ACt state Chapter

WomEN iN FrANChisiNg Forum

FrANChisEE Forum

EDuCAtioN Forum

LEgAL CommittEE

EthiCs CommittEE

stAtE ChAptEr CommittEE mEmBErs

NAtioNAL pArtNErs

NotiCE oF ANNuAL gENErAL mEEtiNg

DirECtor’s rEport

stAtEmENt oF ComprEhENsivE iNComE For thE yEAr ENDED 30 JuNE 2012

stAtEmENt oF FiNANCiAL positioN As At 30 JuNE 2012

stAtEmENt oF CAsh FLoW For thE yEAr ENDED 30 JuNE 2012

stAtEmENt oF ChANgEs iN EQuity For thE yEAr ENDED 30 JuNE 2012

NotEs to thE FiNANCiAL stAtEmENts For thE yEAr ENDED 30 JuNE 2012

DirECtors’ DECLArAtioN

AuDitor’s iNDEpENDENCE DECLArAtioN

iNDEpENDENt AuDitor’s rEport

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the strategy set by the FCA Board over the past four years has been clear and consistent: maintain a favourable and stable operating environment that allows franchise business owners to do what they do best, with the least interference and distraction, and make sure the right programs are in place to support a growing pool of fully aware franchisees, who are able to get the funding they need to launch into business and improve their performance over time.

the strategy is not just sensible, it is a direct response to the key

issues facing every emerging franchise system and many of the

established brands as well.

in fact, the annual survey done for the past four years by

pricewaterhouse Coopers (pwC) with the cooperation of the

FCA has identified consistent challenges confronting the top

200 franchise systems in Australia/New Zealand. the top two

challenges identified in those four annual pwC surveys have

been availability of quality franchisees and the ability to source

funding to get those potential franchisees into business.

through the pwC surveys, our top franchise systems have been

sending a clear message: We have latent growth . the (outstanding)

growth we have experienced could be even greater, had we more

quality potential franchisees available and more finance available to

help them launch their business-owning careers.

i will come back to the FCA strategic response to this message in

a moment. But it is worth pausing to note just how impressive the

growth achieved by our established systems has been.

Four years ago, the world was reeling from the impact of the

global financial crisis. the us and many European countries of

much greater scale than Australia are still reeling. in a period

when a number of countries have had successive years of

economic contraction, Australia has fared relatively well, with

annual growth of around 3%.

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And what is the comparison for those pwC surveyed top 200

Australia/NZ franchise brands? top line growth of more than

11% every year since 2008/09. What an amazing performance.

And what’s more, those systems were not surprised by this

achievement. When others were crying doom and gloom, they

predicted the growth a year out – and then got it, year after

year, despite the extremely tough times in retail!

so when those businesses say ‘we could do more’, governments,

mps and others with an interest in economic prosperity

(i.e. everyone!) should be asking ‘what can we do to help?’.

unfortunately, a handful of politicians have been doing the

opposite. FCA chairman, stephen giles, and i have talked at

length about the background to these unwelcome attempts

to interfere with the highly successful franchising formula

we have in Australia – a formula we can confidently claim to

be the world’s best. so, i won’t dwell on that topic here. it is

an ongoing task, in which we have had good success after a

long battle in WA, a comprehensive outcome in Queensland

(where the battle was much smaller and shorter) and strong

government support in victoria and NsW. the battle is

ongoing in south Australia, where we do face the threat of a

different set of franchising rules being trumpeted by a NsW

academic, the sA Deputy small Business Commissioner, Frank

Zumbo. (yes, that is right, a sydney-based academic from the

university of NsW is the deputy small Business Commissioner

in sA and is involved in dispute resolution in sA). And we face a

possible review of the Franchising Code of Conduct next year.

this battle to overcome moves for unhelpful legislative

intervention is central to the job of maintaining a favourable and

stable operating climate for franchise businesses. it is therefore

a key element of the implementation of the strategy i mentioned

at the start of this report. stephen giles mentions many more

aspects in his Chairman’s report, including the Franchisee

success Club, the AFL retired player initiative, the franchisee

funding push and the retail Leasing Code of Conduct.

All these initiatives are aimed at enhancing the credibility

of the sector, highlighting its success for franchisors and

franchisees and thereby building confidence for the potential

new entrants to the sector.

our education initiatives aim to ensure that when the new

entrants arrive, they do with their ‘eyes wide open’ and can

source relevant, ongoing education to improve their business

management capability and profitability. Education programs

are also targeted to ensure franchisor businesses have the

right options available for staff and senior executives to build

their skills, expertise and adaptability.

to execute our extensive event calendar and all our other

programs, FCA relies upon the support of many volunteers and

partners.

on behalf of everyone at the FCA, i say thank you to all the

volunteer committees (details are included later in this Annual

report). A special thanks goes to chairman, stephen giles, and

Legal Committee Chair, Derek sutherland, who have done a

power of high quality voluntary work for the good of the sector

nationally and in individual states.

Finally, my thanks go to our partners and event sponsors.

Without the backing of our partners franchisebusiness.com.au

(directory website), pacnet (communications provider), and

Whirlwind print (print and marketing services), we simply

would not be able to do the things we do to help make

franchising a great place to be. the support of NAB (National

Awards sponsor) and Franklyn scholar (Academy sponsor) is

also highly valued.

these partners and sponsor companies have not only provided

long term, outstanding service to the sector, their people have

made it a pleasure to do business and be associated with them.

We look forward to more of the same in 2013 and beyond.

Steve Wright

Executive Director


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my greatest ongoing frustration over the many years i have served on the FCA Board is that the Australian franchise sector rarely gets the credit it deserves.

the franchise sector does not just represent franchising, it represents

successful small business in every sector. to test this theory, look at

the market leaders in almost every sector – food, bakery, convenience

stores, fuel, motor vehicle retail, real estate, bedding, homewares,

health and beauty, pharmacy, pool servicing, lawnmowing, home

services etc., and try and find a successful small business of any size

and scale that is not involved in franchising. small businesses that

do not operate under the franchise model simply cannot compete

effectively in what is a highly competitive market featuring major

supermarket chains, department stores and online retailers.

if the government had invented franchising it would be trumpeting

its economic, social, job creation and diversity achievements from

the highest places. the franchise sector is a major contributor to the

Australian economy:

• $128 billion in annual turnover.

• Earning $300 million each year in export income.

• 1100 franchise systems.

• 70,000 franchisees.

• sector employment of around 700,000 people.

the indirect economic impact of franchising has been estimated at

almost $4 billion annually.

Franchising operates across Australia, making an important

contribution not just in capital cities but in regional centres and rural

Australia. strong systems and compliance, and substantial charitable

and community involvement make the franchise sector an excellent

corporate citizen at federal, state and local community level.

the franchise sector continues to outperform the general Australian

economy, with recent reports by pricewaterhouseCoopers and

smartCompany also noting a general level of optimism amongst

Australian franchise systems for the forthcoming year. Franchised

businesses enjoy faster growth and lower failure rates. on average,

they enjoy around twice the success rate, and are 30% quicker to

become cash flow positive, compared to traditional small business.


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And they last, with the average tenure of a franchisee six

to seven years, and 95% of franchisees renewing their

agreements at end of term.

Franchising also provides universal opportunities. some areas

of employment remain largely inaccessible to people from

a non-English speaking background, but franchising is truly

multi-cultural. Without any government assistance, franchisors

provide access to training, support and opportunity that is far

more targeted and relevant than any government assistance

program. And those franchisees engage as employees people

from their own communities, extending the positive reach of

franchising. you only have to look at some of the wonderful

success stories on the Franchisee success Club website to see

the wonderful impact franchising has had on many lives.

(www.franchise.org.au/franchisee-success-club.html)

yet despite our best efforts, most of our politicians, public

servants and members of the media remain frustratingly

ignorant of the benefits of franchising, and the economic and

social contribution franchise systems make to Australian life.

it is a constant battle to get the media to print the numerous

success stories, or take a considered look at franchising.

With that in mind, we this year introduced our FrAN-Connect

program, which aims to harness the collective connections of

people within our sector to disseminate the good news about

franchising more broadly. We also prepared briefing materials

to ensure people were armed with the right information,

and understood the key issues. We continued our Franchisee

success Club, which now boasts over 200 members, so there

was a ready source of great news stories of personal triumph.

We also launched an exciting new initiative with the AFL to

seek to create a new pool of potential franchisees. these

discussions originally focused on indigenous players, but soon

spread to encompass all players.

We continue to press government to introduce legislation

modelled on the us small Business Act, that will provide

improved access to finance for potential franchisees that lack

the collateral to borrow to purchase a business, but meet

all other criteria. responses have been encouraging, as the

positive evidence since the program was introduced in the us

in 1953 is compelling. (yes, 1953 – this is hardly a new idea!)

on the political front, we continue to oppose efforts for

unnecessary state-based regulation of franchising. Apart

from south Australia, we seem to have been successful,

and even in sA we remain confident that the inherent logic

of our arguments will prevail in due course. there is simply

no rational argument to impose a state-based regulatory

framework and bureaucracy on top of the existing highly

effective federal regulatory framework. the high penetration

and success of Australian franchising, and the remarkably

low levels of disputation, justify Australia’s claim to world’s

best practice. in Australia, the level of disputation is around

1-2% of franchisees, with over 80% of all franchising disputes

being resolved by the Franchising Code of Conduct’s mediation

process. this is a stunning result, and compares with the us

disputation rate of around 8%, with many of those matters

involving costly litigation or arbitration.

Australia has the most comprehensive regulatory framework

in the world for franchising. this clearly plays a major role in

ensuring the health of the franchise sector, and in keeping

disputes to a minimum. the Franchising Code of Conduct

features a comprehensive prior disclosure regime that

gives information and confidence to new entrants and is

supported by specific provisions addressing issues such as

transfer, end of term arrangements and termination, and

including a mediation-based dispute resolution framework.

the Code is supplemented by prohibitions in the Competition

and Consumer Act on misleading or deceptive conduct and

unconscionable conduct, with all these requirements policed

in a highly effective manner by the Australian Competition

and Consumer Commission. in addition, national and state

small Business Commissioners provide low-cost mediation and

assistance with disputes.

We have continued our efforts to actively lobby government

to improve the business environment for small business

generally, and have championed the following initiatives:

• a retail Leasing Code of Conduct to curb the excesses of

major shopping centres;

• the introduction of a small Business Act to improve small

business access to finance and government contracts and

reduce the dominance of large corporations;


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• simplifications in the gst and BAs processes and the business

taxation system generally;

• exemptions for small businesses from onerous workplace relations

requirements;

• reductions in unnecessary penalty rates for casual labour; and

• lower energy costs, improved pricing for small business and lower

government red tape.

the FCA represents over 40,000 franchised businesses and the

leading franchise systems and advisors. the vast majority of the top

200 franchise systems are members, and 40% of our membership

comprises advisers/suppliers and franchisees. the FCA has over 200

members inducted into its Franchisee success Club. During the year

we have provided a range of formal and informal educational programs

and networking activities for our members - over 150 events across

Australia last year. We have also improved the quality of Australian

franchising through franchisee pre-entry education programs,

monitoring of behavior through the FCA’s member standards, new

member assessment and ongoing educational workshops and forums.

the FCA also produces a range of educational booklets, texts and

publications.

this has required investment ahead of the curve, and as a consequence

we have incurred an operating loss this year. however, our balance

sheet reserves remain strong, and if our 2012 national convention is the

success we expect, we will have substantially recovered last year’s loss

and restored our reserves in a matter of 4 months.

We remain indebted to our head office team and our army of volunteers

at chapter level, who make it possible to achieve the ambitious goals

we set ourselves. my personal thanks to our partners, and the many

members whose engagement and support makes this such a wonderful

collaborative and high energy sector. my thanks also to my fellow

Directors, and my best wishes to incoming Chairman, michael paul, who

i am sure will continue his outstanding contribution to the FCA during

his term.

With best wishes,

Stephen Giles

Chairman

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since our last Agm things have returned to a sort of normality over here in WA – if you can call the challenges facing the retail sector normal.

i am of course, referring to the legislative activities that have come

to be the order of the day over the last couple of years. Whilst there

continue to be rumblings from both the ALp and even the Nationals,

these have not resulted in any legislative changes.

in line with most other states, we have seen the introduction of a

small Business Commissioner who also heads up the small Business

Development Corporation (sBDC). Despite the initial concerns that

this might lead to a more interventionist approach, this does not

appear to be the case, with the FCA still enjoying a good working

relationship with the sBDC.

if the response i get from the taxi drivers over East is anything to go

by, there is an impression that everything in the West is booming.

Whilst it’s probably true to say that business is generally good over

here, it certainly hasn’t returned to the pre-gFC glory days.

some evidence of this is the increase in enquiries reported by

service-based franchises, usually an indication of an insecure

employment market. the demand for these services continues to

be high and with around 1000 people a week coming in to WA, this is

likely to be the case for some time to come.

A further indication of the challenges facing franchising is the

reduced attendance at local FCA educational events. Whilst this

would seem to be counter intuitive, the fact is that many see training

and education as a cost rather than an investment, and therefore it

becomes one of the first areas to be cut when things tighten up.

Whatever the economic conditions, there will always be success

stories which is why the annual state awards night is the highlight

of the events calendar. this years event was no exception, thanks

to our awards sponsor NAB and a great group of award participants.

good luck to all the WA winners at the National Awards in Canberra.

on behalf of the Board and the WA franchising community, i would

like to thank the WA Chapter Committee who give of their time and

energy to improving the sector in WA.

Mike Stringer

sate president (WA)

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We have again experienced some challenging trading conditions for business

over the last year and an ever changing political landscape, but despite

this it is great to see the franchising sector has continued to perform

very well. this has also been a busy year for the victorian state Chapter

of the FCA and we have been working hard to engage with the franchise

community generally and appropriately represent our members at all levels

of government and with key stakeholders. in preparing for the year we spent

considerable time setting our key objectives and planning our program

of activities and events for the year to ensure they are aligned with FCA’s

National office and importantly, that they meet our members’ expectations

and needs. this process also resulted in the Chapter collectively setting our

mission statement, values, vision and purpose.

What is our purpose? to provide the FCA and our members with outstanding service and representation.

the Committee is very mindful of the tougher trading conditions and how

busy and valuable your time is, so in conjunction with the National office we

have worked hard to further streamline our events calendar to ensure we

deliver timely, relevant and educational topics with practical concepts, ideas

and outcomes that you could effectively use to improve your business. these

have also proved to be a great forum for networking with your peers in the

sector. the victorian state Conference was a great example of the quality

events being delivered to our members.

i would like to take this opportunity to thank all the FCA member firms

and individuals who have hosted these events and importantly, all of the

members who have shown support with their attendance and participation.

the next big event to diarise is NFC12 at the Canberra Convention Centre

from 7 - 9 october 2012 and i look forward to seeing you there.

please also join me in acknowledging and congratulating the hard-working

and dedicated state Chapter Committee members (past and present) for

their time and support over the year. Also, our achievements would not have

been possible without the wonderful support of the FCA National office.

We look forward to representing you all in the coming year and wish you

every success in your business.

Gary Carter

state president (viC/tAs)

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the committee is quite frustrated on how to get more attendances

at the events. Whilst they agree that the topic is very important, the

committee feels that they will get more attendances if we can find a

cheaper alternative which should attract more attendees. it may also

encourage attendees to bring more people from their office.

Following the Board meeting in Brisbane, it was agreed that the sA

committee will trial the next breakfast at the Naval and military club

which had good attendances in previous years. if this is not suitable

we have got a price from the majestic roof garden hotel for a private

room including Av for $27.50 per head.

the president will report back to the board after the next breakfast.

hall of Fame Lunchthe event was very good; we had a about 40 attendees which was

disappointing but again we think that due to business conditions cost

is an issue.

Awards Nightthis was a successful night with about 90 attendees, quite a few

had nominated for awards and this is definitely the key to get the

numbers.

Next Event the next even is the Christmas event which is always well attended

by about 70-80 people.

Mark Langford

state president (sA)

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A year of mixed results and sentiments probably best describes 2012. Whilst some within the Franchise Community have found conditions challenging, others have managed growth / continued growth and even to thrive in a tough environment.

the current climate for business is certainly one of contrasts and this also extends

beyond that of the franchise realm.

in the past 12 months we have seen a change of our state government here in

Queensland while, just as significantly, others have introduced their own state-based

legislation with implications for our industry and its members. the internet also

continues to be a hotspot for many, as demonstrated by the virtual furore around

“e-tailing” and the potential effect upon the traditional retail business model in

particular (under which many franchised businesses operate). this controversial

(and somewhat enigmatic) issue has divided consumers and businesses alike, who

amongst them see variously the potential benefits, disadvantages, opportunities and

threats that come from its undercurrent.

many in business have also wrestled with surrounding issues including the direction

or position of federal government, governments of the various states in matters,

and their respective economic performances. Encouragingly over-all though, despite

challenges and the seemingly uncertain environment, well-managed businesses still

appear to be finding a way forward.

similarly in 2012, the Queensland Chapter of the Franchise Council has continued to

move steadily forward, particularly by engaging with its members through events

and activities such as round tables, breakfasts, CEo dinners and a successful state

Conference. We’ve also had a record number of awards nominations, events dinners

and attendances to same, which will undoubtedly make for a very exciting gala

Awards Dinner at the upcoming FCA National Conference. in touching on these

areas i feel it’s also timely to express warm thanks to those who have given their

valuable support this year. thank you to my fellow Board and Committee members,

both in Queensland and nationally (and to the entire team behind the scenes),

your contribution has been greatly appreciated. Also, special mention and thanks

to retiring committee members for their efforts and involvement throughout the

extended time they’ve served the FCA and the sector.

turning to 2013, there are a few very important items immediately on the agenda in

the form of the next review of the existing Franchise Code of Conduct, along with the

propositions of state-based franchise legislation and seeking retail tenancy reform

under a national code. the Queensland Chapter will continue its active involvement

and representation in these and all matters concerning the Franchise Community. i

look forward positively to 2013 for the franchise sector and to working with all of my

valued colleagues for its further improvement and growth.

Ralph Edwards

state president (QLD/Nt)

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the franchise sector in NsW is strong and resilient. Despite tough retail conditions and government bureaucracy at an all-time high, most franchisors are trading profitably and coming up with unique ways to grow their brand awareness and overall profitability.

many of our franchisor members in NsW are established and savvy

franchise systems and it has been a challenge to stage good events with

real ‘franchise’ content. the Chapter has continued to run a number of

breakfast and round table events which have been well attended. the

stand out breakfast was undoubtedly the ‘hall of Fame’ breakfast, which

saw many CEos, franchise founders and hall of Famers attend. Although

numbers attending NsW breakfasts are not what they used to be 5 years

ago, the feedback from members who have attended has been excellent

and the Chapter is already planning some exciting events for late 2012 and

early 2013.

the highlight event of the year for me was the NsW gala awards dinner.

there were over 125 people who attended from many different franchise

systems. All award categories were well supported and the smiles of those

who won an award was priceless. i anticipate that next year’s event will be

even bigger, and i urge franchisors to encourage their star franchisees to

enter the awards. in all the doom and gloom stories that are constantly

reported, the winning of an award can make all the difference.

it has been an interesting and challenging first year as NsW/ACt president.

i have only been in the role since January 2012 and it is fair to say that

due to resignations and illness, our Chapter committee has had to rely

upon a select few to arrange and organise our events this year. i wish to

acknowledge and thank all of my fellow committee members for their

sustained efforts. i also wish to personally thank rod Laycock (Civic

video), who after many years has retired due to hectic work commitments.

however as the saying goes ‘life must go on’ and we have some new

committee members joining us who are passionate about franchising and i

look forward to working with them.

Sean O’Donnell

state president (NsW/ACt)

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this year, the Women in Franchising (WiF) Committee continued to support, assist and promote women working in the franchise sector.

importantly, it also responded to the Board’s directive

that it build and promote the credibility of franchising

through engaging with relevant women’s groups,

politicians and contacts. in some states, this has the

dual purpose of assisting with the fight against state

based franchise legislation.

For example, in Western Australia, a delegation of

women in franchising met with Kate Doust mLC,

the Labour opposition minister championing the

WA Franchising Bill, and discussed how best to

assist women in small business. Another delegation

attended a Liberal Women’s Council event, and at that

event were able to share their experiences with Bruce

Billson mp, the shadow minister for small Business,

Competition policy and Consumer Affairs. the WiF

Committee also engaged with members of other

relevant women’s groups, including Women’s Network

Australia and Women on Boards, by attending each

others events throughout the year.

A number of WiF events were held in different states

throughout the year, featuring diverse and inspiring

speakers and excellent opportunities for networking.

For example, in New south Wales, Naomi simson,

founder of leading online gift retailer, redBalloon,

was keynote speaker at a very popular event; in

Queensland, the founders of successful national

franchise endota spa, Belinda Fraser and melanie

gleeson, shared their story; and in Western Australia,

Kate grieve, the first woman on the Board of the

Fremantle Dockers Football Club and Christine

matthews, the CEo of WA Cricket Association inspired

their audience. Excellent feedback was received in

respect of all events, including from the men that

attended!

the Committee also continued with the development

of a mentoring program with the roll-out of an

optional buddy program for all new members

facilitated by the state chapter committees. We look

forward to receiving feedback regarding this new

program.

the state winners of the Women in Franchising

Awards were announced at the Excellence in

Franchising award events in each state and we

congratulate and wish each of them the best of luck

for the announcement of the national winner at

NFC12 in october. We look forward to encouraging

more women in franchising to participate in the

awards next year so that we can continue to promote

the success of women in franchising.

Finally, i would like to thank all of the members

of the WiF Committee for their participation and

contributions throughout the year.

Tamra Seaton

Chairperson

Women in Franchising Committee

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this year has been a year of consolidation for the Franchisee Forum.

We launched the Franchisee success Club Forum at NFC11 in

melbourne. With attractively subsidised rates, about 60 people

attended for the afternoon sessions which included FCA award winning

franchisees, michael Caddy (mr rental) and matt Walker (grill’d) along

with re-Anna Chatman (Franchise relationships) and motivational

speaker matt mcKeon.

the FCA has partnered with Franklyn scholar, one of Australia’s

largest rtos, to provide educational programs to franchising systems

nationally.

Franchisee Success Club

the Franchisee success Club has been extremely successful in

highlighting franchisee success stories. in 2011, the Franchisee success

Club passed the milestone of 200 members and continues to grow.

Retail leasing code

the FCA is continuing the work through discussions with government,

industry leaders, other associations and stakeholders to develop a retail

tenancy Code of Conduct; the aim being to adopt some of the good

aspects of the Franchising Code into the retail leasing area.

if we can work with landlords in a more collaborative and constructive

way, we can achieve a win-win for franchisees and for the shopping

centre owners.

the FCA will be holding an industry policy Forum at NFC12 to discuss

this initiative further and actions to be taken throughout 2012 – 2013.

Tony Melhem

Franchise Council of Australia

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During Fy12, the FCA’s Franchise Academy implemented a number of education initiatives for the benefit of franchisors and franchisees.

1. the establishment of an exclusive education

partnership with a nationally registered training

organisation (Franklyn scholar) to support

the development of a skilled franchise sector

workforce by:

a. harnessing existing vocational education and

training sector capacity for the benefit of FCA

members;

b. identifying the role of the rto and Australian

Apprenticeship Centres in delivering and

supporting workplace training, assessment and

continuing professional development;

c. maximising education and training opportunities

and access for FCA members; and

d. up-skilling and multi-skilling through innovative

and accelerated qualification pathways.

2. Coinciding with the appointment of Franklyn

scholar, the FCA secured funding from the Federal

government under the National Workforce

Development Fund, to deliver a subsidised dual

qualification – Diploma of management and

Diploma in retail management. A number of FCA

franchisors have taken up the opportunity to roll

out this nationally accredited vocational education

program to their entire network of franchisees

and store managers as part of their in-house

professional development programs supported by

Franklyn scholar.

3. the establishment of an education technology

partnership with World manager to educate

franchises on the value of technology in the

workplace. As part of the new FCA technology

partnership, World manager offers franchise

brands the opportunity to be taken nationally

into the corporate cloud in only 60 days with no

set up costs. the focus of this partnership will be

on what franchises can and should be doing with

technology within their business. At FCA events

in the coming year, World manager will be hosting

forums and speakers sharing technology stories

and franchise success. in the Franchise Academy

monthly newsletters, there will be regular stories

on how franchises are using technology to advance

their communications or operations performance.

the Franchise Academy continued to deliver on

previously successful programs including:

a. Eyes Wide open seminar for potential new

franchisees and franchisors across all major

capitals in Australia; and

b. marketing of education supplier programs

including Franchise Advisory Centre short courses

and griffith university’s online pre-entry franchise

education program.

over the course of the next 12 months the Franchise

Academy will focus on:

a. guiding the strategic direction for the development

of accredited vocational education resources and

event related programs;

b. identifying existing and emerging needs for FCA

members and priority audiences;

c. providing membership perspective and feedback to

inform the FCA Board’s contribution to building the

“Body of Knowledge” within the FCA community;

d. engage in generative discussions that provide

a platform for continuous evolution and

improvement of the FCA’s role in education related

activities; and

e. deliver relevant qualifications for the benefit

of employees in franchise systems that are the

educational ‘touch points’ with franchisees, e.g.,

Field staff, Network managers, etc.

Jim Cornish

Chair

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the Legal Committee has been very active during the year by contributing to a number of activities.

the input by members of the Legal Committee was

provided by teleconferences that were well attended.

the contributions from the Legal Committee are

always helpful and they enable the FCA to hear

feedback and consider the views of senior members

of the Legal Committee and formulate opinions and

validate FCA policy positions on many things including

legislative reforms.

the Legal Committee meetings have traditionally

been used as a forum to provide updates to the

Legal Committee members on FCA policy and for

members to raise important developments affecting

the sector, particularly in relation to the vast amount

of legislative reform being undertaken at state and

Commonwealth levels.

unfortunately the state based legislative reform

proposals in sA and WA have now spread to NsW

by the introduction of another private members

Bill. these state based proposals have been an

unnecessary distraction and pre-empt the next

Commonwealth review of the Franchising Code

of Conduct. No doubt that review will require the

involvement of, and contributions from, many

members of the FCA Legal Committee in the year

ahead.

Earlier this year, the Legal Committee determined

that it would be beneficial for the FCA to be proactive

with the impending review of the Code which is

scheduled to take place in 2013. As a consequence,

the Legal Committee has been preparing a detailed

written submission to provide to the Commonwealth

which will be submitted when the review is

announced. that submission will identify common

issues of concern amongst practitioners and offer

practical solutions to improve the language and

application of the Code.

i particularly want to thank rebecca Bedford, Ben

Dodgshun and the team at minter Ellison who

have worked extremely hard to coordinate these

submissions on behalf of the Legal Committee.

many of the suggested changes and improvements

to the Code are based on extensive and considered

contributions from senior members of the Legal

Committee. i also want to thank all of those members

of the Legal Committee who contributed their

invaluable comments and suggestions on ways to

improve the language and application of the Code.

i believe that one of the functions of the Legal

Committee is to help foster collaboration and

involvement by senior members of the FCA legal

fraternity. the Legal Committee provides the

opportunity for members to demonstrate collegiate

support to colleagues and exchange ideas and

expertise, irrespective of the size of the firm they

represent or which state they are located. i would like

to thank all of those members of the Legal Committee

who have assisted this year and i am also extremely

appreciative of their time and efforts.

once again, this year the NFC12 Legal symposium

in Canberra will be a “must attend” event. i express

my sincere thanks to the tireless work of this

years’ organising committee in putting together a

comprehensive legal program. in particular, Alicia hill

(as Chair) and her team comprising philip Colman,

tamra seaton, Josh simons and tony garrison have

worked extremely hard to put together a fantastic

legal program with excellent speakers which i highly

commend to you.

Finally, i would like to thank stephen giles for his

never ending support and also each and all of

the members of the Legal Committee who have

participated and provided advice, feedback and

assistance to the various projects of the FCA, and look

forward to the projects for the next year.

Derek Sutherland

Chair

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the Ethics Committee received 26 complaints during the past 12 months. All were investigated by our Chief operating officer, Kym De Britt, as part of the initial stage of our complaints handling and ethics process.

in the course of the year, in excess of 105 enquiries

were handled by the FCA head office staff, in

particular the membership manager. these enquiries

did not result in formal complaints being lodged as

they were well handled simply by providing advice

which enabled the enquirer to resolve the problem.

there were no matters which were sufficiently serious

to be escalated to the Ethics Committee.

the Ethics Committee will continue to take on a broader

role within the FCA with the production of ethical

guidelines on important franchising issues.

Stephen Giles

Chair

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VIC COMMITTEE

Corina Vucic FC Business solutions Dean Salomone hairhouse Warehouse

Julia Taylor pacnet Peter Fiasco Quest serviced Apartments

Gary Carter FC Business solutions Phil Blain Business Development Company

Sara Pantaleo La porchetta Tanya Robertson sigma pharmaceuticals

Steve Wren Appliance tagging services Cameron Graham ANZ mobile Lending

Bruce McFarlane hall & Wilcox Rebecca Bedford minter Ellison

Spiro Vournazos redcat

NSW COMMITTEE

Andy Levestek mortgage Choice Tony Melhem Coco Cubano

Kate Fellows World manager Elisabeth Ritchie HWL Ebsworth

Tracy Steinwand subway systems Australia Tania Katsanis Flowers by Fruit

Abraham Hatoum Looksmart Alterations Trish Rogers Trish Rogers Consulting

Jane Lombard the Franchise shop Paola Tanner Fuse Franchise partners

Sean O’Donnell thomsons Lawyers Rod Laycock Civic Video & Card Connection

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WA COMMITTEE

Bronwyn Butcher Frontline Tamra Seaton Norton rose

Carolyn Meighan talbot oliver Shay Scott Fisher & paykel Appliances

Dean Franks Australian Franchising systems Joe Lazzara Borrello Legal

John Dorazio Walker Wayland Leon Pike City Farmers Dogwash

Linda Steele think Big management Consultancy Mark Fernandez BDA Business Development

Mike Stringer Car Care / housework heroes Steve Hansen think Big management Consultancy

Stephen Seddon Westpac Veronica Jumeaux Downings Legal

QLD COMMITTEE

Alan Payne mr rental Warren Ballantyne gutter-vac

Dean Atkins poolWerx Darryn McAuliffe NAB

Gary Fryer inxpress Derek Sutherland iCoN Law

Jan Timms Worldwide printing James Theologidis sothertons Chartered Accountants

Jim Roddy parmalat Jason Gehrke Franchise Advisory Centre

Ralph Edwards Lease 1 Philip Ciniglio market minds

Rob Melin L&m partners Simone Pentis Fitness matters

Sarah Cobb Cariblue

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SA COMMITTEE

Andrew Bampton soloman Bampton Andrew Harvey optimum Assurance group

Ben Brazier pitcher partners Bronwyn Lee minter Ellison

Fiona Gilbert DLA phillips Fox Jock Dean outdoor Living Designs by mr Carports

Kate Rayson Communikate et al Mark Langford gametraders

Matthew Prescott thomsons Lawyers Peta St Clair Dr pC

Ramsey Andary DmAW Lawyers Rosalie Vis v.i.p home services

Ian Irvine Fox tucker Dave Thornton Dial a Digger

Andrew Russo Kennedy & Co

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Without the tremendous support of our National 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 our National partners:

• Bloomtools

• Diversified Exhibitions

• Franchise Business.com.au

• NAB

• pacnet

• Whirlwind print

• Franklyn scholar

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Notice is hereby given that the 29th Annual general meeting of Franchise Council of Australia Ltd will be held at 5.30pm on 7th october 2012 at the National Convention Centre, 31 Constitution Avenue, Canberra, ACt, 2601

Agenda

1. Apologies.

2. to receive and adopt minutes of the 2011 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

2012 and the reports by Directors and auditors thereon.

5. to confirm appointment of Directors.

6. to appoint Auditors.

By order of the Board

Kym De Britt

secretary

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your Directors present their report on the company and its controlled entities for the financial year ended 30 June 2012.

Directors

the names and particulars of Directors in office at any

time during or since the end of the year are:

Stephen Giles B.Ec. LL.B Director

Fellow of the Franchise Academy. Chairman of the

FCA since December 2010. member of Executive

Committee, Former Chair of Ethics and Legal

Committees. Board member since 1997. partner with

Norton rose Lawyers.

George Yammouni B.Bus.stud CpA past Chairman

member of the Executive Committee. past president

of victorian state Chapter (2003 to 2006). Board

member since 2003. Elected as independent Director

in 2006. CEo of Bathroom Werx.

Tony Melhem mmA, BA Comm Deputy Chairman

Director and Chairman of National Franchisee Forum.

Board member since october 2007, FCA Franchisee of

the year 2005-06. gloria Jeans Franchisee.

Sean O’Donnell BA LLB (hons)

partner of thomsons Lawyers. Franchise and dispute

resolution lawyer. Accredited mediator. Current FCA

NsW/ACt Chapter president and member of FCA Legal

Committee. Board member since February 2012.

Gary Carter gradDipBus, gradDiphr

president of victorian Chapter. past member of

victorian Chapter FCA since 2008. general manager

– Franchise operations FC Business solutions. Board

member since July 2011.

Ralph Edwards Director and president of

QLD state Chapter.

Board member since october 2008. Director of Lease1.

Mike Stringer Director and president of

WA state Chapter.

Board member since october 2008, Director of Car

Care Australia and heroes group.

Jason Gehrke mBA

Chair suppliers Forum. Director of Franchise Advisory

Centre. Franchise lecturer and examiner at griffith

university. publisher, Franchise News & Events. Board

member since october 2008.

Mark Langford president of the south

Australian Chapter.

Director of the Franchise Council of Australia since

october, 2009. Founder and managing Director of

gametraders retail franchise of 37 stores nationally.

Michael Paul CEo/Founder of pack & send

international.

Deputy Chairman Board member since october 2009.

Jim Cornish Bvsc(hons), Bsc(vet)(hons)

sydney university, mBA Agsm.

CEo of Ecowash mobile international.

Board member since october 2009.

Andy Levsteck

Director and president of NsW state Chapter.

Board member July 2011 - December 2011.

Steve Wright B. Bus FCA Executive Director

Board member since February 2008.

Directors have been in office since the start of

the financial year to the date of this report unless

otherwise stated.

No Director has an interest in any contract or

proposed contract with the company declared since

the last Directors’ report.

Company Secretary

the following person held the position of Company

secretary at the end of the financial year:

Kym De Britt mBA, B. Bus, FCA Chief operating officer.

Appointed Company secretary september 2008.


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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.

Performance Measurement

the company measures its performance by reviewing

attendance of members at national and state

conferences, member use of education facilities and

subscription renewal.

Operating Results

the consolidated profit of the economic entity after

providing for income tax amounted to a net loss of

$298,369.

Review of Operations

Member Development and 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 coordinator of all mainstream

education and professional development services in the

sector, as well as the only provider of member services

including specialised insurance broking.

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 Academy

has established an exclusive education partnership

with nationally registered training organisation,

Franklyn scholar, to support the development of a

skilled franchise sector workforce. the Academy also

established an education technology partnership with

World manager to educate franchises on the value of

technology in the workplace.

continued over page


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Directors’ Emoluments

Directors do not receive any fees for their time

and service on the Board. however, the FCA meets

all their travelling and accommodations costs for

attending Board meetings throughout the year.

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:

DIRECTOR BOARD MEETINGS TELECONFERENCE FINANCE COMMITTEE

Number eligible to

attend

Number Attended

Number eligible to

attend

Number Attended

Number eligible to

attend

Number Attended

Stephen Giles 6 6 3 3

George Yammouni 6 5 3 3

Tony Melhem 6 6 3 3

Ralph Edwards 6 5 3 3 6 6

Mike Stringer 6 6 3 3

Jason Gehrke 6 6 3 3

Mark Langford 6 4 3 3

Michael Paul 6 6 3 3

Jim Cornish 6 4 3 2

Sean O’Donnell 3 3 2 2

Gary Carter 6 5 3 2

Steve Wright 6 6 3 3 4 4

Andy Levstek 2 2 1 1


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Members Liability if the Company is Wound Up

the entity is incorporated under the Corporations Act 2001 and

is an entity limited by guarantee. if the entity is wound up, the

constitution states that the liability of each member is limited.

Auditor’s Independence Declaration

the Auditor’s independence Declaration for the year ended

30 June 2012 has been received and can be found on page 45

of this report.

signed in accordance with a resolution of the Board

of Directors.

Stephen Giles

Director

Dated this 1st day of october 2012


NOTE Consolidated Group

2012 $ 2011 $

revenues 2 2,508,826 2,800,468

Employee Benefits Expense (1,406,860) (1,159,756)

Depreciation and Amortisation Expense (52,813) (53,782)

Other Expenses 3 (1,347,522) (1,507,009)

Profit / (Loss) Before Tax (298,369) 79,921

income tax Expense 4 - (15,957)

Profit / (Loss) for the Year (298,369) 63,964

other Comprehensive income - -

Total Comprehensive Income Attributable to Members (298,369) 63,964

the accompanying notes form part of these financial statements.

statement of Comprehensive income for the year ended 30 June 2012

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2012 $ 2011 $

CURRENT ASSETS

Cash and Cash Equivalents 5 1,237,269 1,244,716

trade and other receivables 6 154,970 248,117

inventories 7 9,893 3,450

other Current Assets 8 129,169 108,354

TOTAL CURRENT ASSETS 1,531,301 1,604,637

NON-CURRENT ASSETS

property, plant and Equipment 10 35,839 55,147

intangible Assets 11 42,223 72,023

other Non-Current Assets 8 10,000 10,000

TOTAL NON-CURRENT ASSETS 88,062 137,170

TOTAL ASSETS 1,619,363 1,741,807

CURRENT LIABILITIES

trade and other payables 12 1,027,333 817,317

short-term provisions 13 119,143 153,235

TOTAL CURRENT LIABILITIES 1,146,476 970,552

TOTAL LIABILITIES 1,146,476 970,552

NET ASSETS 472,887 771,255

EQUITY

retained Earnings 472,887 771,255

TOTAL EQUITY 472,887 771,255


statement of Financial position as at 30 June 2012

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2012 $ 2011 $

CASH FLOWS FROM OPERATING ACTIVITIES

receipts from members and Non-members 2,772,127 2,577,260

payments to suppliers and Employees (2,833,445) (2,619,222)

interest received 57,575 48,119

Net Cash Provided by (used in) Operating Activities 16 (3,743) 6,157

CASH FLOWS FROM INVESTING ACTIVITIES

purchase of property, plant and Equipment 10a (3,704) -

purchase of intangible Assets - (32,960)

Net Cash Provided by (used in) Investing Activities (3,704) (32,960)

NET(DECREASE)/INCREASE IN CASH

AND CASH EQUIVALENTS HELD

(7,447) (26,803)

Cash and Cash Equivalents at the Beginning of the Financial year

1,244,716 1,271,519

Cash and Cash Equivalents at End of the Financial Year 5 1,237,269 1,244,716


statement of Cash Flow for the year ended 30 June 2012


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Retained Earnings

$

General Reserves

$Total

$

Consolidated Group

Balance at 1 July 2010 707,292 - 707,292

profit Attributable to members of parent Entity 63,964 - 63,964

Balance at 30 June 2011 771,256 - 771,256

Loss Attributable to members of parent Entity (298,369) - (298,369)

Balance at 30 June 2012 472,887 - 472,887


statement of Changes in Equity for the year ended 30 June 2012


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NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

these financial statements include the consolidated financial statements and notes of Franchise Council of Australia Ltd and controlled entities (‘Consolidated group’ or ‘group’). Franchise Council of Australia Ltd is an unlisted not-for-profit public company limited by guarantee, incorporated and domiciled in Australia.

Basis of Preparation

the Directors have prepared the financial statements on the basis that the company is a non-reporting entity. these financial statements are therefore special purpose financial statements that have been prepared in order to meet the requirements of the Corporations Act 2001.

the financial statements have been prepared in accordance with the mandatory Australian Accounting standards applicable to non-reporting entities under the Corporations Act 2001 and the significant accounting policies disclosed below, which the Directors have determined are appropriate to meet the needs of members. such accounting policies are consistent with the previous period unless stated otherwise.

the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

a. Principles of Consolidation

A controlled entity is any entity over which Franchise Council of Australia Ltd has the power to govern the financial and operating policies so as to obtain benefits from its activities.

A list of controlled entities is contained in Note 9 to the financial statements.

As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended.

All inter-company balances and transactions between entities in the consolidated group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted by the parent entity.

Where controlled entities have entered or left the consolidated group during the year, their operating results have been included from the date control was obtained or until the date control ceased.

b. Income Tax

in assessing its income tax liability, Franchise Council of Australia Ltd applies the principles of mutuality to its revenue and expenses. revenue in the form of receipts from members represents mutual income and is not subject to income tax. Expenditure associated with mutual activities is not deductible for income tax purposes. All other receipts and payments are classified for income tax purposes in accordance with income tax legislation.

income tax expense is calculated on the operating result at current taxation rates. A permanent difference due to mutual activities with members, result in the current income tax expense of Franchise Council of Australia Ltd being $NiL (2011: $16,379).

Franchise Council of Australia Ltd and its wholly-owned Australian subsidiaries have not formed an income tax consolidated group under the tax Consolidation system.

c. Inventories

inventories are measured at the lower of cost and net realisable.

Notes to the Financial statements for the year ended 30 June 2012


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NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued

d. Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses.

Plant and Equipment

plant and equipment are measured on the cost basis less depreciation and impairment losses.

the carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. the recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets’ employment and subsequent disposal. the expected net cash flows have been discounted to their present values in determining recoverable amounts. the cost of fixed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads.

subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation

the depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is depreciated on a straight line basis over the asset’s useful life to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

the depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset Depreciation Rate

plant and equipment - computer hardware 25.0%

plant and equipment - computer software 40.0%

Furniture and fittings 7.5%

the assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

gains and losses on disposals are determined by comparing proceeds with the carrying amount. these gains and losses are included in the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.



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e. Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to entities in the consolidated group, are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight line basis over the shorter of their estimated useful lives or the lease term.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

f. Financial Instruments

Initial Recognition and Measurement

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention.

Financial instruments are initially measured at fair value plus transaction costs where the instrument is not classified as at fair value through profit or loss. transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below.

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity is no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. the difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed is recognised in profit or loss.

Classification and Subsequent Measurement

(i) Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method.

Impairment

At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. in the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. impairment losses are recognised in the income statement.



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g. Impairment of Assets

At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. if such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.

impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

h. Intangibles

intangibles are recorded at cost less accumulated amortisation and impairment where they have a finite life. the estimated useful life and amortisation method is reviewed at the end of each annual reporting period. Where the intangibles are considered to have an indefinite life the impairment is measured annually by reference to the discounted future inflows of the asset.

i. Foreign Currency Transactions and Balances

Foreign currency transactions are translated into functional currency using exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement.

j. Employee Benefits

provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. those cashflows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cashflows.

k. Provisions

provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

l. Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short term borrowings in current liabilities on the balance sheet.



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m. Revenue

revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. Any consideration deferred is treated as the provision of finance and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. the difference between the amount initially recognised and the amount ultimately received is interest revenue.

revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods.

interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets is the rate inherent in the instrument. Dividend revenue is recognised when the right to receive a dividend has been established.

Dividends received from associates and joint venture entities are accounted for in accordance with the equity method of accounting.

revenue from the rendering of a service is recognised upon the delivery of the service to the customers.

All revenue is stated net of the amount of goods and services tax (gst).

n. Goods and Services Tax (GST)

revenues, expenses and assets are recognised net of the amount of gst, except where the amount of gst incurred is not recoverable from the tax office. in these circumstances, the gst is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

receivables and payables in the balance sheet are shown inclusive of gst.

Cash flows are presented in the cash flow statement on a net of gst basis.

o. Comparative Figures

Where required by Accounting standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

p. Critical Accounting Estimates and Judgments

the Directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group.



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2012 $ 2011 $

NOTE 2: REVENUE

Continuing Operations

- AFE/Education income 803 -

- Book sales 10,968 14,251

- Commissions 15,000 15,000

- Conferences and Awards 624,436 751,357

- Diploma of Franchising 4,451 9,299

- Franchise review: Advertising and sponsorship 14,300 38,120

- Functions 91,888 143,950

- insurance Commission 37,697 75,179

- interest received 2a 57,575 48,119

- members’ subscriptions 869,950 992,236

- other income 42,357 28,686

- sponsorship 348,118 300,354

- Website Advertising 391,283 383,917

Total Revenue 2,508,826 2,800,468

a. Interest Revenue from:

- other parties 57,575 48,119

Total Interest Revenue 57,575 48,119



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Consolidated Group

2012 $ 2011 $

NOTE 3: OTHER EXPENSES

Administration Expenses 213,795 265,030

Advertising and promotion 27,744 8,506

Committee Expenses 4,194 14,516

Conference and Awards Expenses 543,673 522,740

Cost of Book sales 6,442 8,479

Course Consultancy and Associated Costs 35,401 28,141

Facility Expenses 138,868 138,990

Finance and Legal Expenses 103,074 108,250

Franchise review Costs 102,938 74,594

Function Expenses 82,011 169,264

information technology Expenses 50,066 77,308

international initiatives 1,520 1,318

Loss on scrapping of Equipment - -

representation Expenses 37,796 89,873

1,347,522 1,507,009

NOTE 4: INCOME TAX

a: The Components of Tax Expense Comprise:

- Current tax - 16,379

- under / (over) provision in respect of previous year - (422)

Total tax expense - 15,957

As per Note 1b. Franchise Council of Australia Ltd applied the principles of mutuality to its revenue and expenses, in assessing its income tax liability. revenue in the form of receipts from members represents mutual income and is not subject to income tax. Expenditure associated with mutual activities is not deductible for income tax purposes.



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Consolidated Group

2012 $ 2011 $

NOTE 5: CASH AND CASH EQUIVALENTS

Cash at Bank and on hand 595,794 509,520

short-term Bank Deposits 641,475 735,196

1,237,269 1,244,716

NOTE 6: TRADE AND OTHER RECEIVABLES

CURRENT

- trade receivables 151,127 248,117

- other receivables 3,843 -

154,970 248,117

Provision for Impairment of Receivables

Current trade receivables are generally on 30 day terms, with follow up every 7 days thereafter. it has not been found to be necessary to charge interest on trade receivables. By closely managing trade receivables, those which are in excess of their terms rarely become irrecoverable. Where any trade debtor does become irrecoverable, the amount is written off and is included in other Expense items. Accordingly, no provision for impairment of receivables has been required in either of the years shown in these statements.



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Consolidated Group

2012 $ 2011 $

NOTE 7: INVENTORIES

Stock On Hand 9,893 3,450

NOTE 8: OTHER ASSETS

CURRENT

Credit Card Clearing 5,481 13,528

prepayments 44,044 8,106

Deposits paid 79,644 86,720

129,169 108,354

NON CURRENT

other 10,000 10,000

10,000 10,000

TOTAL OTHER ASSETS 139,169 118,354

Country of Incorporation Percentage Owned

2012 2011

NOTE 9: CONTROLLED ENTITIES

Controlled Entities Consolidated

parent Entity

Franchise Council of Australia Ltd Australia - -

subsidiaries

Franchise Academy Ltd Australia 100% 100%

FCA insurance services pty Ltd Australia 100% 100%

Franchise Academy Ltd was incorporated on 8 December 2005.

FCA insurance services pty Ltd was incorporated on 2 August 2006.



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Consolidated Group

2012 $ 2011 $

NOTE 10: PROPERTY PLANT AND EQUIPMENT

Plant and Equipment

At Cost 95,236 91,531

Accumulated Depreciation (84,125) (65,641)

Accumulated impairment Losses - -

Total Plant and Equipment 11,111 25,890

Furniture and Fittings

At Cost 60,378 60,378

Accumulated Depreciation (35,650) (31,121)


Total Furniture and Fittings 24,728 29,257

Total Property, Plant and Equipment 35,839 55,147

a. Movement in Property, Plant and Equipment

Balance at Beginning of year 55,147 82,563

Additions 3,704 -

Disposals - -

Depreciation Expense (23,012) (27,416)

Total balance at End of Year 35,839 55,147



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Consolidated Group

2012 $ 2011 $

NOTE 11: INTANGIBLE ASSETS

A. Intangible Assets Being Amortised

At Cost:

- Website and online processes 128,745 128,745

- pCi retail Lease submission 43,568 43,568

- Franchising Australia report 12,500 12,500

- Course Establishment Costs 107,799 107,799

Total Cost 292,612 292,612

Accumulated Amortisation (251,139) (221,339)


Total 41,473 71,273

b. Intangible Assets Which the Directors Have Assessed as

Having an Indefinite Life.

At Cost:

- trade marks 750 750

Total 750 750

Total Intangible Assets 42,223 72,023

NOTE 12: TRADE AND OTHER PAYABLES

CURRENT

trade Creditors and Accruals 67,117 118,563

superannuation and pAyg payable 60,106 56,047

unearned subscription income 591,929 443,098

other unearned income 242,074 154,708

gst obligation 66,107 44,901

1,027,333 817,317



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Consolidated Group

2012 $ 2011 $

NOTE 13: PROVISIONS

Ketchell’s Case - 15,057

income tax - 16,379

Employee Entitlements 119,143 121,799

Total Current Provisions 119,143 153,235

NOTE 14: CONTRIBUTED EQUITY

in accordance with the company’s memorandum and Articles of Association, the Franchise Council of Australia Ltd is limited by guarantee and does not have share capital.

NOTE 15: CONTINGENT ASSETS OR LIABILITIES

there are no known contingent assets or liabilities as at report date.

NOTE 16: CASH FLOW INFORMATION

Reconciliation of Cash Flow from Operations with Profit after Income Tax

profit / (Loss) after income tax (298,369) 63,964

Non-cash Flows in profit

Depreciation and Amortisation 52,812 53,782

Loss on scrapping of Equipment - -

Changes in Assets and Liabilities, Net of the Effects of purchase and Disposal of subsidiaries

Decrease / (increase) in trade and other receivables 84,679 (111,994)

Decrease / (increase) in other Assets (20,814) 25,713

Decrease / (increase) in inventories (6,444) 1,832

increase / (decrease) in payables 218,484 (46,173)

increase / (decrease) in provisions (34,091) 19,033

(3,743) 6,157



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Consolidated Group

2012 $ 2011 $

NOTE 17: PARENT ENTITY DISCLOSURE

Current Assets 1,493,097 1,589,339

Non-Current Assets 202,506 229,648

Total Assets 1,695,603 1,818,987

Current Liabilities 1,147,174 972,430

Total Liabilities 1,147,174 972,430

Shareholders Equity

retained Earnings 548,429 846,557

Total Shareholders Equity 548,429 846,557

profit / (Loss) (298,129) 89,726

Total Comprehensive Income (298,129) 89,726

NOTE 18: AUDITORS’ REMUNERATION

During the financial year the following fees were paid or payable for services provided by William Buck Audit (vic), the aduitor of the company:

- audit of the financial report 12,500 9,500

NOTE 19: MEMBERS’ GUARANTEE

the entity is incorporated under the Corporations Act 2001 and is an entity limited by guarantee. if the entity is wound up, the constitution states that the liability of each member is limited.

NOTE 20: EVENTS AFTER THE BALANCE SHEET DATE

there are no known events after the balance sheet date which might have a significant impact on the Consolidated group.

NOTE 21: COMPANY DETAILS

the registered office and principle place of business of the company is:

suite 6, 307-313 Wattletree road malvern East, victoria 3145



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the Directors have determined that the company is not a reporting entity and that this special purpose Financial report should be prepared in accordance with the accounting policies described in Note 1 to the financial statements.

the Directors of the company declare that:

1. the financial statements and notes, as set out on pages 27 to 43 are in accordance with the Corporations Act 2001 and:

a. comply with Accounting standards and the Corporations regulations 2001; and

b. give a true and fair view of the financial position as at 30 June 2012 and of the performance for the year ended on that date of the company and consolidated group;

2. in the Directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

this declaration is made in accordance with a resolution of the Board of Directors.

on behalf of the Board

Stephen Giles

Director melbourne

Dated this 1st day of october 2012

Directors’ Declaration


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franchise council of australia | annual report 2011 - …€¦ · franchise council of australia...

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