Proposed Changes to the Franchising Code of Conduct
Updated: Jan 27, 2021
An Australian Government Parliamentary Joint Committee Report on the operation and effectiveness of the Franchising Code of Conduct ("Fairness in Franchising") was published in August 2019.
A number of changes to the Franchising Code of Conduct were recommended in the Fairness in Franchising Report.
Late in 2020 the Department of Industry, Science, Energy and Resources released its Exposure Draft outlining several possible changes to the Franchising Code of
Conduct (the Code).
The Australian government is proposing changes aimed at:
introducing new measures to protect Franchisees
improving the information available to Franchisees
lifting Franchisor standards of conduct
The Exposure Draft seeks to solicit public comment and submissions from other interested stakeholders in relation to regulatory matters affecting the franchising sector and proposed changes to the Franchising Code of Conduct, to minimise any unintended consequences before the changes becomes law.
The final form of amendments to the Franchising Code of Conduct are expected to be introduced in early 2021.
In summary, the changes to the Franchising Code of Conduct under consideration include:
Disclosure by the franchisor to the franchisee of a "key facts sheet" as part of its disclosure obligations
Improved disclosure of future capital expenditure requirements
Disclosure of rebates, how these are calculated, and whether such rebates are shared with franchisees
Restrictions in terms of passing-on certain costs to franchisees
Improved disclosure in relation to marketing funds
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 7-day notice period to the franchisee before termination on the basis of “special circumstances” to allow for dispute resolution processes to commence
Restraint clauses will be rendered ineffective unless a franchisee has committed a “serious” breach
Dispute resolution to include not only mediation, but also conciliation and voluntary binding arbitration
New dispute resolution process to deal with multiple-franchisee and franchisor disputes
Increase in fines and penalties
changes to the standardised ‘Information Statement’
All new provisions to commence from 1 July 2021, except for the new dispute resolution provisions which will commence the day the Code regulations are registered.
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