Upcoming Changes to the Franchising Code of Conduct: Here’s the Lowdown on What’s Coming Your Way!

Big changes are coming to the Australian franchising world, and they’re going into action on April 1, 2025 (no, it’s not an April Fool’s joke!). The Franchising Code of Conduct is getting a major overhaul to boost transparency, fairness, and dispute resolution for both franchisors and franchisees. This means more protection for franchises and better compliance from franchisors. Let’s dive into what’s changing and why it matters to you!

So, What’s New and Exciting?

1. Regular Reviews of the Code

Get ready for a fresh look at the Code every 5 years! This mandatory review will make sure the Code stays relevant and in tune with the needs of the industry.

2. A Reworked Purpose for the Code

The purpose of the Franchising Code of Conduct is getting a facelift! It will now focus even more on:

• Playing fair and square with each other (franchisors and franchisees alike).
• Making sure there’s a “cooling-off” period before entering, renewing, extending, transferring, or terminating franchise agreements.
• Keeping the dispute resolution process smooth and fair.

The Code will also continue to cover the following:

• Franchise agreement terms.
• Compliance with the Franchise Disclosure Register.
• Civil penalties for any rule-breaking.
  

3. Bigger Disclosure Requirements for Franchisors

Franchisors, brace yourselves – there are some new transparency rules coming your way! You’ll now have to:

• Give more financial and operational info to potential franchisees.
• Disclose key supplier rebates and benefits.
• Say goodbye to the “key facts sheet” – you won’t have to provide it anymore.
  

4. Stronger, Smoother Dispute Resolution

No more endless litigation! The new Code introduces:

• Extra mediation and arbitration options for resolving disputes.
• Easier access to alternative dispute resolution processes for franchisees.
  

5. Fairer Exit for Franchisees

Exiting a franchise agreement just got a whole lot easier for franchisees! Here’s what’s changing:

• Clearer processes for franchisees who want to exit.
• Limits on unreasonable termination clauses.
• Expanded compensation for franchisees if a franchisor shuts down the franchise network early.
  

6. Better Transparency with Marketing Fund Management

Franchisors with a marketing fund will now have to be more open about how the funds are spent, including:

• Giving franchisees detailed financial reports on the fund’s expenditure.
• Providing more transparency on fund usage.
  

7. Higher Penalties for Non-Compliance

The Code now comes with bigger penalties for breaches – especially for misleading disclosures or unfair contract terms. If you’re caught not following the rules, you could face a fine of up to $198,000!

What Does This All Mean for Franchisors and Franchisees?

For Franchisors:

It’s time to give your franchise agreements, disclosure documents, and operations a makeover to make sure they comply with the new Code before the April 2025 deadline. Failing to get it right could mean hefty penalties and legal trouble!

For Franchisees:

These changes are designed to make your franchising journey fairer, clearer, and way more supportive. If you’re thinking about entering or renewing a franchise agreement, now’s the perfect time to get some legal advice and make sure you understand how these changes will affect you.

So, whether you’re a franchisor or franchisee, there’s a lot to look forward to! Let’s make franchising better for everyone.

‍