The Franchises commentary in the Purchase and Sale of Business publications in each state has been reviewed and enhanced.
This work is a precursor to the significant remaking of the Franchising Code of Conduct, which will commence on 1 April 2025.
The amendments to the Code, under the Competition and Consumer (Industry Code-Franchising) Regulations 2024, introduce new obligations, stricter rules around restraint of trade, and strengthened protections for franchisees.
The amendments arise out of the Independent Review of the Franchising Code of Conduct Final Report delivered to the Commonwealth Government in December 2023. The Government response to that report has been to…
…take a staged approach, which seeks to implement quicker changes in the short-term whilst undertaking a comprehensive analysis of the legal and regulatory changes to improve fairness and reduce regulatory burden in the longer term. This includes working with the sector to develop best-practice guidance, and simplifying disclosure requirements so that it’s easier for both franchisees and franchisors to understand their roles and obligations. Other measures to improve access to justice include increasing the number of breaches of the Code that attract penalties and publicly naming franchisors that fail to participate meaningfully in alternative dispute resolution.
The key amendments under the 2024 regulations include:
- a new obligation on franchisors to provide the franchisee with a reasonable opportunity to make a return on investment;
- changes to termination rights, including compensation to the franchisee for early termination;
- new franchisee rights to compensation for non-renewal of a franchise agreement;
- new franchisee rights to opt out of cooling-off and disclosure provisions in some circumstances;
- consolidation of the franchisor’s pre-contract and annual disclosure obligations;
- a restriction preventing a franchisor from executing a franchise agreement until the 14-day pre-contract disclosure period has passed; and
- increased penalties and regulatory investigation powers.
Further statutory amendments are under consideration, including the feasibility of introducing a licensing regime to better regulate most aspects of the franchisee-franchisor relationship.
The enhanced Franchises commentary is found in the If required – Franchises folder on the matter plans for Purchase and Sale of Business in each state, together with relevant franchising precedents.
When the regulatory amendments commence on 1 April, the commentary will be further amended, and the precedents updated as required.