5-Point plan to save businesses from ‘catastrophe’

In a unique and unified approach, three (3) key peak industry groups have collaborated to present a united 5-point plan to attack the challenges of recent lockdowns to ensure business survival.

Collaboration Fca Nra On Franchise Buyer For Covid Catastrophe

This is in light of the fear that the current wide-ranging lockdowns on such a large portion of the population, will be catastrophic to businesses and retailers.

The Franchise Council of Australia (FCA), National Retail Association (NRA), and the Association of Convenience Stores, unveiled their plan on 27 July for business survival, and is seeking endorsement from the National Cabinet.

For accuracy on the position, the detail of the points in the plan as provided by the groups, are stepped out below;

1. JobKeeper 3.0: The first two JobKeeper programs met their objectives to support  business and job survival, preserve employment relationships, and provide needed income support. A targeted JobKeeper 3.0 program would continue to provide assistance to the most affected businesses and support economic recovery.

2. Emergency cash payments: debt-trapped small businesses need access to emergency cash payments to have funds available to pay immediate creditors, rent and remain solvent.

3. ATO to defer lodgements and outstanding payments for debt-trapped businesses: There is record collectible debt owed to the Australian Taxation Office of $21 billion – well over half of this collectible debt is held by just 6.4% of SMEs. With these small businesses struggling to meet their tax obligations, now is not the time for the ATO to trigger any action which could take them under.

4.Banking payment deferrals: Banks provided welcome relief and support during 2020 to Australian businesses experiencing hardship. With lockdowns and government restrictions in place across Australia, banks again need to provide support and payment deferrals to stranded businesses.

5. National Leasing Code of Conduct (Mk 2): Constitutionally, commercial leasing arrangements sit within the remit of the states and territories. In March 2020, National Cabinet signed off on the National Leasing Code of Conduct. Currently, retail businesses are in the same trading predicament as they were in March 2020, without the cash reserves they may have been able to call on last year. These businesses have the same or worse drop in turnover right now, and are being asked to pay 100% of their commercial rent with no support. We are calling for a short-term reinstatement of the National Leasing Code of Conduct, which concluded in March this year with JobKeeper.

In addition, the groups have given further detail to their position as it relates to dealings under the National Leasing Code, a key area and significant pain point for multiple stakeholders;

  • Landlords and tenants share a common interest in working together, to ensure business continuity, and to facilitate the resumption of normal trading activities at the end of the COVID-19 pandemic during a reasonable recovery period. 
  • Landlords and tenants will be required to discuss relevant issues, to negotiate appropriate temporary leasing arrangements, and to work towards achieving mutually satisfactory outcomes.
  • Landlords and tenants will negotiate in good faith. 
  • Landlords and tenants will act in an open, honest and transparent manner, and will each provide sufficient and accurate information within the context of negotiations to achieve outcomes consistent with this Code. 
  • Any agreed arrangements will take into account the impact of the COVID-19 pandemic on the tenant, with specific regard to its revenue, expenses, and profitability. Such arrangements will be proportionate and appropriate based on the impact of the COVID-19 pandemic plus a reasonable recovery period. 
  • The Parties will assist each other in their respective dealings with other stakeholders including governments, utility companies, and banks/other financial institutions in order to achieve outcomes consistent with the objectives of this Code. 
  • All premises are different, as are their commercial arrangements; it is therefore not possible to form a collective industry position. All parties recognise the intended application, legal constraints and spirit of the Competition and Consumer Act 2010. 
  • The Parties will take into account the fact that the risk of default on commercial leases is ultimately (and already) borne by the landlord. The landlord must not seek to permanently mitigate this risk in negotiating temporary arrangements envisaged under this Code. 
  • All leases must be dealt with on a case-by-case basis, considering factors such as whether the SME tenant has suffered financial hardship due to the COVID-19 pandemic; whether the tenant’s lease has expired or is soon to expire; and whether the tenant is in administration or receivership. 
  • Leases have different structures, different periods of tenure, and different mechanisms for determining rent. Leases may already be in arrears. Leases may already have expired and be in “hold-over.” These factors should also be taken into account in formulating any temporary arrangements in line with this Code.
  • As the objective of this Code is to mitigate the impact of the COVID-19 pandemic on the tenant, due regard should be given to whether the tenant is in administration or receivership, and the application of the Code modified accordingly. 
  • The Qualifying applicant would be the franchisee in the case of a franchise arrangement 
  • A process for binding determination of situations where landlords and tenants have been unable to reach agreement.
  • Ability for tenants to terminate a lease in severe hardship / unviable lease on reasonable terms as outlined above.