A new Franchising Code of Conduct operates from 1 April 2025.
The new code is set out in Chapter 2 of the Competition and Consumer (Industry Codes-Franchising) Regulation 2024. Sections have been significantly reordered and renumbered from the previous code in Schedule 1 to the Competition and Consumer (Industry Codes-Franchising) Regulation 2014. The new code of conduct generally applies to all franchise agreements entered into, renewed, extended or transferred on or after 1 April 2025. However, some changes apply from later dates under transitional provisions relating to franchise agreements and disclosure requirements.
Amendments
Key changes to franchise agreements and disclosure requirements under the new code include:
Franchise agreements
- Removal of the requirement for franchisors to create, maintain, or provide a Key Facts Sheet for prospective franchisees. This applies from 1 April 2025.
- Restrictions on restraint of trade clauses where a franchise agreement contains an option for the franchisee to renew or extend the agreement and the franchisor does not do so. This applies to agreements entered into, transferred, renewed, or extended on or after 1 April 2025.
- Franchisees must be compensated for early termination in certain circumstances. Agreements are required to specify how compensation is determined. This applies to agreements entered into, transferred, renewed, or extended on or after 1 November 2025.
- Franchisees must have a reasonable opportunity to make a return on any investment required by the franchisor as part of entering into the agreement. This applies to agreements entered into, transferred, renewed, or extended on or after 1 November 2025.
- Franchisors may, on certain expanded grounds, terminate a franchise agreement with 7 days’ notice. This applies to agreements entered into, transferred, renewed, or extended on or after 1 April 2025.
- Franchisees can opt out of both disclosure and the 14-day cooling-off period if a new agreement with the same franchisor is substantially similar to their current agreement. This applies from 1 April 2025.
- Marketing and cooperative funds are now combined as a specific purpose fund to which franchisees contribute and which must be used for a specified purpose related to the business’s operation. This applies from 1 November 2025. Franchisors are to operate existing marketing and cooperative funds in compliance with the old code until this time.
- The Australian Small Business and Family Enterprise Ombudsman now has the ability to name and shame franchisors who refuse to engage in or who withdraw from alternative dispute resolution processes. This applies from 1 April 2025.
Disclosure requirements
From 1 November 2025, all disclosure documents must include certain information set out in Schedule 1 of the Regulation.
Additional information to be provided in the new disclosure document includes:
- telephone number and email address of former franchisees;
- whether a franchisee could face competition from businesses not associated with the franchisor; and
- details about whether the franchisee is required to undertake significant capital expenditure during the term of the franchise agreement.
Any materially significant facts that arise between the preparation of a disclosure document and when it is provided to a potential franchisee must also be disclosed.
A franchisor need not include the new requirements for specific purpose funds and significant capital expenditure in its disclosure document until 1 November 2025, but may choose to do so.
From 1 April 2025, the franchisor’s Franchise Disclosure Register profile must also include:
- any convictions for a serious offence;
- any relevant judgment in civil proceedings;
- any relevant bankruptcy or insolvency; and
- whether its franchise agreement provides for arbitration of disputes.
Publication updates
The By Lawyers precedents Franchise Agreement and Model Disclosure Document for Franchisee or Prospective Franchisee precedents, available on the Sale of Business and Purchase of Business matter plans for each state, and the commentary on Franchises, have all been updated accordingly.