News & Insights

While it has been almost a year since the amended Franchising Code of Conduct (“The Code”) took effect on 1 July 2021, we know there may be businesses out there who still haven’t got around to amending their documents. If you have not yet updated your Franchise Agreements and Disclosure Documents, it’s important that you do so immediately to ensure they are fully compliant with the amendments. Failure to do so could result in a breach of the Code.

Key changes were implemented across a number of different business functions including marketing, leasing and operations. Our Franchising team has compiled a list of some of the key changes to ensure your business is compliant.

operations

Franchisors are now required to provide a Key Facts Sheet with disclosure information.

finance

The changes to the Code have improved disclosure of future capital expenditure requirements and are in line with recent changes to the Automotive Code.

The disclosure of the nature of rebates and how these are calculated has changed, as well as whether and how these are shared with franchisees.

A ban on passing on the legal costs of preparing a franchise agreement, and potentially other legal costs arising from the agreement has been implemented as of 1 July 2021.

leasing

An improvement to the old Code, the disclosure of leasing information if premises are is required.

marketing

There has been an improved disclosure of marketing funds, with penalties now applicable for abuse of marketing funds included in the Code.

administration

The most significant changes to the Code are administrative and should be reviewed and applied.

The changes are:

• an extension of the cooling-off period from seven to 14 calendar days;
• an extension of cooling-off rights to buyers of existing franchises, in addition to “greenfield” outlets;
• amendments to allow franchisees to negotiate an early exit from a franchise agreement;
• a new seven-day notice period to the franchisee before termination on the basis of “special circumstances”, with a 28-day period to allow for dispute resolution processes;
• restraint clauses in franchise agreements are weakened by a new “serious” breach requirement (although serious is not defined) to narrow the circumstances in which a restraint of trade clause will be enforceable;
• dispute resolution to include conciliation and voluntary binding arbitration (in addition to mediation);
• retrospective unilateral variations to franchise agreements to be prohibited;
• franchisors cannot refuse to take part in multi-party dispute resolution; and
• the Australian Small Business and Family Enterprise Ombudsman to oversee all franchising dispute resolution advisor functions.

If you have any questions about ensuring you’re up to date with the code changes, the Franchising team at Macpherson Kelley is well placed to assist. Please do not hesitate to contact us.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.