The Australian Government has released a draft update to the Franchising Code of Conduct, with the consultation period open until 29 October 2024. The revisions, set to come into effect on 1 April 2025, aim to modernise and strengthen regulations for the franchising industry.
Key Proposed Changes:
- Franchisee Returns: Franchisors will be expected to ensure that franchisees have a reasonable opportunity to achieve a return on their investment throughout the term of their agreement. This change is designed to better align the financial interests of both franchisors and franchisees.
- Enhanced Disclosure Obligations: Franchisors will be required to provide prospective franchisees with more comprehensive disclosure documents. These documents must include detailed information on the franchise system, financial performance, and any potential risks, helping prospective franchisees make more informed decisions.
- Good Faith Obligations: The draft reiterates the importance of acting in good faith, requiring both franchisors and franchisees to engage in fair and honest dealings. This move seeks to promote a more equitable relationship between the parties involved.
- Civil Penalties for Non-Compliance: The Australian Competition and Consumer Commission (ACCC) will have the authority to impose civil penalties for breaches of the Code. This includes penalties for failure to act in good faith or to provide adequate disclosure documents.
These proposed changes aim to improve transparency, fairness, and accountability within the franchising sector. Franchisors, franchisees, and other stakeholders are encouraged to review the draft and provide feedback during the consultation period to help shape the final version of the Code.
If you have any questions about how these proposed changes may affect your franchise, or if you need assistance navigating the complexities of franchising law, Aventus Legal is here to help. We specialise in franchising law and can provide expert advice tailored to your business needs. Take a look also at our fixed price $3,000 franchise system health check to ensure your system is up to date and optimised for success. Contact us today for more information.
