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Review of Franchising Code of Conduct

Posted on 3 November 2014

Some of the changes you can expect to the Franchising Code of Conduct from 1 January, 2015:

1. Online Sales

If a franchisor, its associates, any of its franchisees or any third parties can sell some or all of its products online then the franchisor may need to disclose this.  The franchisor needs to disclose the extent to which the goods or services can be supplied into the territory of a franchisee.

If the goods or services are made available through a third party website eg retailers sell your product online then the franchisor will need to disclose the domain name or URL of that website and full registration details of the domain name.

3. Non Disclosure of Previous Franchisee Details

It looks like franchise agreements and deeds of surrender and release will need to change so as not to infringe the new requirement that the franchisee must genuinely choose not to have its details included in the disclosure document rather than be "induced" to make a non-disclosure request.

Franchisors often require disgruntled franchisees to direct the Franchisor to withhold their contact details as Franchisors do not want potential franchisees contacting them and receiving negative information.

It should be interesting to see what proof may be required to show it was genuinely the franchisee's choice to have its details withheld.

4. Relief from Re-disclosure

Currently we are required to redisclose to franchisees if the terms of the franchise agreement change after disclosure takes place.  This would usually occur if the franchisee has negotiated changes.

Now, it looks like the Government will allow some leeway in that there will not be a requirement to redisclose if the changes to a franchise agreement are as a result of the franchisee's request.  It will be interesting to see how far this will go and if it will include changes as a result of negotiations and not just a simple agreed request.

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