Proposed Changes to the Franchising Code of Conduct

Buying a franchise is a big decision. It is important you understand what you are getting into before you make the final decision. The Franchising Code of Conduct is a mandatory industry code across Australia that regulates the conduct of franchising participants towards each other. The Franchising Code includes:
• disclosure requirements
• a good faith obligation
• a dispute resolution mechanism
• a cooling-off period
• procedures for ending a franchise agreement.

The ACCC regulates the Code and investigates alleged breaches. Decisions about which matters to pursue are made in line with the ACCC’s Compliance and Enforcement Policy.

Proposed Changes
In August 2020, the Australian Government released the Fairness in Franchising report. This was a long-awaited response to the Joint Committee on Corporations and Financial Services Inquiry (JCCFSI) as to the operation and effectiveness of the Franchising Code of Conduct. The Exposure Draft of Changes to the Franchising Code of Conduct was provided in early November last year, which lays out a plan to introduce, and expand upon, the new measures in the Report. The amendments include (but are not limited to) the following:

DISCLOSURE REGIME
1. To require a disclosure document to be made available both in electronic and hardcopy form.
2. To make technical changes to clause 13 of the Franchising Code to increase transparency about retail leases but also to clarify that franchisors will not need to provide documents they do not possess.
3. To require a franchisor’s interest in a leasing arrangement to be disclosed in the Key Disclosure Information Fact Sheet.
4. Amend the Franchising Code so that any financial information (such as earnings information) must be part of the disclosure document and require disclosure documents to include a statement on the accuracy and appropriateness of that financial information provided by the franchisor.

ARRANGEMENTS AND REBATES
4. To oblige franchisors to disclose information on supplier rebates, commissions and other payments and any master franchisor controls and or rebates from suppliers – this information may be included in the Key Disclosure Information Fact Sheet.
5. To clarify that the cooling off period is measured in calendar days and to clarify that the disclosure period must begin at least 14 days before signing a franchise agreement.

INCREASING COOLING OFF PERIODS FROM 7 TO 14 DAYS
6. To allow a franchisee to terminate the franchise agreement at any time up to 14 days after the last of certain events have occurred. Those events include the agreement being signed, payment being made, disclosure documents being received and if applicable a copy of the terms of the lease being received.
7. To extend the statutory right to cool off to a transfer of an agreement to a new franchisee, where the transferee is required to enter into a ‘substantially new agreement’ with the franchisor. It will not be extended to renewals or extensions of agreements.

If you would like to find out more about these proposed changes and your rights and options, Straits Lawyers are here to help. Simply send us an email at info@straitslawyers.com or give us a call on 8410 9069 to arrange an appointment for an interview.

Alternatively, you can book an online consultation with us via this link: https://straits-lawyers.square.site/product/online-consultation-/11?cs=true

Please note that this article does not constitute legal advice and Straits Lawyers will not be legally responsible for any actions you take based on this article.