News & Insights

The Franchising Code of Conduct (Code) was first introduced in 1998 and at present, the review of the Code seeks to address the ongoing challenges in the franchising sector to ensure the provisions in the Code are more comprehensive.

In a significant development in late 2023, the 2023 Review of the Code was packed with 25 findings, 23 formal recommendations and 34 implementation suggestions. The report is a comprehensive guide for the Government’s consideration. One standout proposal advocates the introduction of a licensing system for franchisors – a recommendation that promises to increase Code compliance and minimise franchisees from potential harm caused by non-compliant franchisors.

The consensus from the review is clear – while the Code serves its purpose, there is room for significant improvement of the regulatory framework for franchising in Australia.

The next step from the review is for the Government to provide their response by mid-2024, with possible changes to the Code released ahead of their implementation by April 2025.

Proposed recommendations to The Franchising Code of Conduct

The review report highlighted the following recommendations for the Franchising sector, these include (but are not limited to):

• Enhance clear warning statements before purchase.
• Strengthen the ACCC’s ability to enforce the Code.
• Increase transparency in marketing spending.
• Mandate explicit warnings for franchisees and potential franchisees.
• Introduce penalties for failure to retain or provide documents.
• Raise penalties for alleged Code breaches and make more penalties available.
• Revise the Code’s purpose to acknowledge franchisors’ stronger bargaining position.
• Hold franchisees responsible for all marketing spending.
• Impose prudential requirements on franchisors at the start and during the franchise’s lifespan.
• Place conditions on franchisors when attracting franchisees.
• Provide the ACCC or another regulator with tools to promptly address and prevent localised and future harm to prospective franchisees.
• Establish accessible binding dispute resolutions.

Important note for franchisors

It is crucial for franchisors to actively stay updated of any upcoming changes in the Franchising Code.

As these changes are anticipated or in progress, franchisors must proactively engage in the process of updating and refining their franchising documents to ensure alignment with the evolving requirements set out in the Code.

How can Macpherson Kelley assist?

If you have any questions or require further assistance regarding the franchising review, please contact one of our experts.

Otherwise, keep an eye out for our further updates, as the recommendations are adopted (or not) in the legislation or Franchising Code.

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.