If you are a franchisor or a franchisee, trading in Australia, it is important to note that amendments were made to the Australian Franchising Code of Conduct (“Code”) 1 June 2021. Most of these amendments apply to franchise agreements entered into, renewed or extended since 1 July 2021, unless an exception applies.
Some of the changes which have been made to the Code are as follows:
Pre-entry disclosure information
More information is required to be provided by a franchisor to prospective franchisees before entering into a franchise agreement (subject to the timeframes specified in the Code), such as:
Cooling Off Period
The Code now provides that a franchisee may terminate a franchise agreement within 14 days after the parties enter into a new franchise agreement (cooling off period).
In addition, there is also a cooling off period for existing agreements that are transferred between an old franchisee to a new franchisee under the franchise agreement.
A franchisor may require that a franchisee make payment of the franchisor’s legal costs relating to preparing, negotiating or executing the franchise agreement, before the franchisee starts the franchised business and provided that the amount is specified in the franchise agreement in accordance with the requirements of the Code.
Varying a Franchise Agreement
The Code provides that a franchisor must not vary a franchise agreement with retrospective effect unless the franchisee has given written consent to the variation.
Restraint of Trade
Amendments have been made by the Code in relation to the inclusion of restraint of trade clauses in franchise agreements. For instance, the Code provides that a restraint of trade clause in a franchise agreement has no effect after the agreement expires if immediately before expiry, the franchisee was not in serious breach of the agreement or any related agreement.
Provisions have been included in the Code in relation to the types of dispute resolution options available such as: conciliation, mediation and alternative dispute resolution methods, dispute notifications between parties and resolving disputes of multiple franchisees with a single franchisor.
The Code sets out the circumstances in which franchisors and franchisees can terminate the franchise agreement early as well as procedures.
Marketing fund obligations have now been clarified by the Code to apply to the fund administrator. For instance, this may be a franchisor, a master franchisor or a third party authorised to administer the fund.
Felicity Cara-Carson, Felicity.Cara-Carson@pointonpartners.com.au +61 (03) 8625 8926
Jess Tomlinson, firstname.lastname@example.org +61 (03) 8625 8910
Level 14, 565 Bourke Street
Melbourne VIC 3000
Level 6, 111 Elizabeth Street
Sydney NSW 2000
Tel: +61 3 961 47707 Email: email@example.com http://www.pointonpartners.com.au/