Changes to the Franchising Code – What you need to know ahead of 1 July

The Australian Government recently released amendments to the Franchising Code of Conduct (Franchising Code).  These changes have arisen as a result of the Parliamentary Inquiry into the franchising sector, the subsequent Parliamentary Joint Committee’s Fairness in Franchising Report, and consultation on the resulting exposure draft legislation.  The aim of the amendments is to promote competition and fair trading in the franchising sector.  While the final amendments have been much anticipated, there have been some changes from the exposure draft legislation, particularly with respect to penalties (which are no longer doubling to $133,200) and supplier rebate and financial benefit disclosure (which are no longer extended to non-pecuniary benefits).

In short, there are key changes to disclosure requirements, with franchisors required to provide a mandatory key fact sheet in addition to the disclosure document, and to including additional information in the disclosure document about disputes with franchisees (not just litigious ones), supplier rebates, leasing arrangements, and end of franchise arrangements.

Additionally, dispute resolution processes have changed, allowing for new arbitration and conciliation mechanisms.  Cooling off periods have been extended from 7 to 14 days, and apply to a broader range of scenarios.  Franchisees are now afforded a right to request early termination of the franchise agreement, and the ability for franchisors to terminate for special circumstances without notice has been curtailed.  Civil penalties have also been added for breaches of marketing fund obligations.  These are just a few of the key changes to the Franchising Code, which franchisors will need to be familiar with very quickly.

The changes take effect in a staggered way.  There are 3 main dates to consider:

• 2 June 2021:  somechanges to dispute resolution provisions take effect (notably the availability of voluntary arbitration for disputes notified on or after this date);

• 1 July 2021: the majority of the amendments take effect, including changes to franchise agreements and processes; and

• 1 November 2021: changes that relate to the disclosure document apply to any disclosure documents given on or after this date.

We recommend that you check your processes and documents, and ensure they are updated by the relevant dates.  Our franchise team can help you with further advice on your rights and obligations under the amended Franchising Code, and with necessary amendments to your documentation and processes.

Thanks goes to Jennifer Ashlan and Olivia Coughlan for preparing this article

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.