A new, draft Franchising Code of Conduct is set to be released this year following the Australian Government’s agreement with all 23 recommendations in the 2023 review of the Code. The aim of the recommendations is to strengthen the franchise sector through increased transparency, fairness and mutual understanding between franchisees and franchisors.

The reworked Code is intended to begin on 1 April 2025.

What Has Been Recommended?

Here’s a summary of the recommendations from Dr Michael Schaper, author of the independent review.

The Sector and the Code

1. The Australian Government should collect better statistics about the franchising sector.
2. The Code should be remade, largely in its current format.
3. The Code should have a clear statement of purpose.
4. The Code to apply to service and repair work conducted by motor vehicle dealers.
5. The Code should be reviewed every 5 years.

Entering Into a Franchise Agreement

1. The pre-entry information for prospective franchisees (such as disclosure documents and key facts sheets) should be simplified and consolidated.
2. Franchisor obligations to existing franchisees should be simplified.
3. All franchise agreements should give franchisees a reasonable opportunity to make a return on investment.
4. All franchise agreements should include provisions for compensation for franchisees in the event of early termination.
5. The Franchise Disclosure Register’s public visibility and use should be improved.
6. The Franchise Disclosure Register should include additional information about dispute resolution and adverse regulator action.

During a Franchise Relationship

1. Franchisors should be encouraged to consult franchisees about major changes to their business models during the term of their franchise agreements.

Ending a Franchise Relationship

1. The rules relating to termination for serious breaches should be simplified.
2. Franchisors and franchisees should be provided with guidance around franchisee-initiated exits.
3. Use of unreasonable restraints of trade in franchise agreements should be further limited.

Regulatory Oversight and Resolving Disputes

1. The ACCC or another government agency should create an online government franchise resource like the ASIC MoneySmart website.
2. Government agencies should work with relevant sector participants to improve standards of conduct by developing best-practice guidance and education in franchising.
3. The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) should have additional powers to name franchisors who have not participated meaningfully in alternative dispute resolution.
4. The Australian Government should help franchisees access low-cost legal advice before formal alternative dispute resolution.
5. Franchise interests (like ASBFEO) should be considered for a role in the designated complaints function for the ACCC.
6. Franchisees should be able to seek a ‘no adverse costs’ order when bringing a matter against a franchisor for breach of the Code or the Australian Consumer Law.
7. Under the Code, penalties and associated investigation powers and infringement notice regime should be increased.
8. The Australian Government should consider introducing a licensing regime to help regulate most aspects of the franchisee–franchisor relationship.

Takeaways for Franchisors

Be prepared for major updates to your franchise documentation in 2025. Significant changes might be required before 1 April 2025 following the release of the new Code or during the usual July–October update period.

Will these changes lead to better relationships between franchisors and franchisees? We need to see the details first, but they’ll certainly impact franchisors’ administration burdens. Get in touch with our IP, franchising and technology team to find out more about what the upcoming changes could mean for your franchise.

The content of this page is for information only. The content does not constitute legal advice and should not be relied upon as such. You should obtain advice that is specific to your circumstances before taking any action.

 

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