Changes to the mandatory Franchising Code of Conduct came into effect on 1 March 2008. The changes mean additional rights and responsibilities for all franchisees and franchisors, who need to ensure their operations comply with the new rules.
All franchise businesses must comply with the mandatory code under the Trade Practices Act 1974. The Code sets out requirements including the information that must be disclosed by a franchisor, minimum conditions within the franchise agreement, and complaint handling and dispute resolution procedures.
The amendments to the Code are designed to ensure an adequate level of disclosure between franchisors and current or prospective franchisees. They are aimed at increasing the transparency, quality and timeliness of disclosure to existing and prospective franchisees.
The changes may place extra reporting requirements on franchisors who may need to review the level and type of information they are providing to franchisees and the timeframes within which they provide that information.
Some of the key changes include:
-
franchisors being required to give franchisees a copy of the franchise agreement in the form it is to be executed
-
disclosing materially relevant facts to franchisees within 14 days as opposed to the 60 days previously required
-
details of all receipts and expenses of marketing and other cooperative funds to be provided to franchisees
-
the need to disclose the last known particulars of each ex-franchisee (unless the franchisee requests that their details be withheld)
-
foreign franchisors may no longer be exempt from the Code
-
the prohibition on the use of general waivers (i.e. broad disclaimers) in franchise agreements regarding prior written or verbal representations.
The Code is administered by the Australian Competition and Consumer Commission (ACCC). Further information is available on the ACCC website or via the Small business helpline on 1300 302 021.
Business.gov.au also has a new Franchising topic. You can find information on franchise agreements and manuals, taxation for franchising businesses, franchising your own business and complying with the Franchising Code of Conduct.