The Franchising Code of Conduct

The Franchising Code of Conduct (the “Code”) governs franchising in Australia. It governs the obligations of a Franchisor and a franchisee.

Franchisors should be aware of a number of provisions including:

1. Information Statement

A Franchisor is required to give an Information Statement (in the form required by the ACCC) to a potential franchisee not later than 7 days after the prospective franchisee formally applies or expresses an interest in acquiring a Franchised Business.

A failure to comply may result in a potential fine of up to $187,800.

Be aware of what “expresses an interest” could encompass.

2. The Disclosure Document

The Disclosure Document must:

• be updated annually; and
• be provided to a franchisee at least 14 days before it enters into a Franchise Agreement or renews or extends the term or scope of a Franchise Agreement.

Be aware of what constitutes “extending a scope” of a Franchise Agreement. This can include a material change, for instance, agreeing to extend the expiry date.

3. The Key Facts Sheet

The Key Facts Sheet must:

• be updated annually; and
• be provided to a franchisee with the Disclosure Document.

4. Franchise Disclosure Register

The Franchisor is required to update its information on the Franchise Disclosure Register by no later than 14 November each year.

5. Material Change

If there is a material change to the Franchisor or the franchise system, then the Franchisor must give written notice to all franchisees within the Franchise System within 14 days. This includes such things as:

•  a change in ownership or control of the Franchisor;
• civil proceedings by the Franchisor by at least 10% of or 10 franchisees; and
• a change in the ownership or control of the Intellectual Property or the Intellectual Property itself.

A failure to comply with this clause may result in a penalty of $50 million or similar.

Action

Franchisors should ensure that they keep abreast of the ongoing changes to the Franchising Code of Conduct and other applicable laws. Franchising law and competition and consumer legislation are dynamic and forever evolving. It is imperative that franchisors are aware of their changing obligations.

The Franchise & Business Lawyers can help you comply with your obligations under the Code. If you have any questions, please email us here.