Changes to the Franchising Code Now Apply

5 Juni 2021

On 1 June 2021, the Australian Government released amendments to the Franchising Code of Conduct and a number of these have already begun to apply. A summary of when various key changes take effect is set out below. 

From 2 June 2021: amendments have taken effect regarding dispute resolution which apply to all disputes notified on or after 2 June 2021 (even if the agreement was entered into before that date). The changes mean there are additional dispute resolution options available (such as voluntary arbitration, conciliation and multi-party alternative dispute resolution) and “rapid” appointment of an alternative dispute resolution (ADR) practitioner/arbitrator is contemplated for certain disputes. The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) will now oversee all dispute resolution advisor functions.

From 1 July 2021: the process that applies in granting a franchise will change as follows:

  • The form of the Information Statement that must be provided to prospective franchisees will change (it must be given before the other required disclosure documents are provided)
  • A new “Key Facts Sheet” must also be given to franchisees (the form of this is yet to be published)
  • Additional information regarding leasing and premises must be given where relevant
  • A longer cooling-off period of 14 days applies and the cooling-off period will only begin on franchisees receiving necessary documentation including, where relevant, the terms of leases or occupancy rights
  • Documents need to be provided in formats requested by the franchisee (electronic and/or hard copy)
  • Capital expenditure requirements must be discussed and appropriately disclosed (unless certain exceptions apply).

From 1 July 2021: franchise agreements entered into, renewed or extended will need to be amended to reflect Franchising Code changes which include:

  • Seven days’ notice to be given by franchisors for terminations in special circumstances, with a new prohibition on terminating the agreement for 28 days where there is a dispute 
  • Franchisors being prohibited from passing on certain legal costs
  • New cooling off rights (including for transfers) and the longer cooling off period 
  • Retrospective unilateral variations being prohibited without a franchisee’s consent
  • Further narrowing of the circumstances in which a restraint can be enforced.

From 1 November 2021: updated disclosure documents must reflect new requirements which include:

  • Additional information that must be disclosed regarding mediations/conciliations/arbitrations that have occurred, leases/property, goodwill, the term, early termination arrangements and capital expenditure 
  • Additional information that is required regarding rebates (including how these are calculated and whether and how these are shared with franchisees)
  • Earnings information, if provided, must be given with the disclosure document.