News & Insights

The Franchising Code of Conduct exposure draft has been released with 11 of the 23 recommendations agreed to in the Government’s response in May 2024 being implemented as part of the remaking of the Franchising Code of Conduct (Code).

The consultation process has wrapped up but it was not about reviewing the decisions within the exposure draft. Instead, it allowed the opportunity for those interested to comment on how the decision will be implemented into the change in law.

Can the exposure draft be changed?

Given this is an exposure draft, these changes may be amended prior to the legislation coming into effect. The new Code is expected to come into effect on 1 April 2025, and unless clarified within the legislation, Franchisor’s should assume that Disclosure Documents will need to be updated in accordance with the relevant changes by 1 April 2025.

What are the proposed changes to the Franchising Code of Conduct?

A non-exhaustive list of the currently proposed changes include:

• reference to “specific purpose funds”;
• restraint of trade clauses to be stricter;
• amendment to the Code’s purpose;
• servicing and repairs of motor vehicles to be captured;
• removal of key facts sheet;
• opt-out options for franchisees;
• reasonable return on investment for franchisees;
• compensation for early termination;
• amendments to termination for serious breaches;
• powers to name franchisors who do not meaningfully participate in dispute resolution; and
• penalty changes.

What should Franchisors do now?

Franchisors are going to have to wait to see the feedback that was provided through the consultation process which closed on 29 October 2024.

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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.