Posted by Elizabeth Gore-Jones
on 15 December 2023
On 15 December 2023, the ACCC issued a media release urging franchisors to urgently review and amend their standard form franchise agreements or to be prepared for potential enforcement action after a review of franchising contracts found wide-ranging concerns.
The ACCC issued a report which can be found here.
You will note that the ACCC has published its findings after completing targeted franchising compliance checks.
ACCC Deputy Chair Mick Keogh said, “We are concerned that franchisors are failing to grasp the importance of compliance with the unfair contract terms provisions of the ACL. Every franchising agreement we reviewed contained potentially unfair contract terms.”
The ACCC found that many contract terms were likely to be broader than reasonably necessary to protect the legitimate business interest of a franchisor.
Mr. Keogh stated as follows, “This is why we strongly encourage franchisors to use our report to inform a review of all their contract terms, and to seek independent legal advice about their obligations. Franchisors should remove or amend any potentially unfair contract terms immediately, to avoid potential penalties. Franchisors should also not seek to enforce any existing unfair contract terms.”
The major concerns identified related to:
1. variation clauses;
2. withholding and set-off payment clauses;
3. audit power clauses;
4. restraint of trade clauses; and
5. termination clauses.
The ACCC provided the following tips for franchisors:
(a) Consider both points of view. – Even if you think a term is necessary to protect your business’s legitimate interests, consider the detriment it could cause from the franchisee’s point of view.
(b) Include counterbalancing terms.
(c) Avoid broad terms that are not necessary.
(d) Comply with the Australian Consumer Law and the Code.
(e) Use clear and simple language in the contracts.
(f) Be transparent.
If you are a franchisor seeking legal guidance on this matter, our experienced team at The Franchise & Business Lawyers is at your service.
Contact us here for assistance.
