Logo

By

Franchising Code Of Conduct

On 1 January 2015, the old Franchising Code was repealed and replaced with a new Franchising Code of Conduct.

The new Code applies to conduct on or after 1 January 2015.

The new Code:

  • introduces an obligation under the Code for parties to act in good faith in their dealings with one another
  • introduces financial penalties for serious breaches of the Code
  • requires franchisors to provide prospective franchisees with a short information sheet outlining the risks and rewards of franchising
  • requires franchisors to provide greater transparency in the use of and accounting for money used for marketing and advertising and to set up a separate marketing fund for marketing and advertising fees
  • requires additional disclosure about the ability of the franchisor and a franchisee to sell online
  • prohibits franchisors from imposing significant capital expenditure except in limited circumstances.These are significant changes and it is important that franchisors, franchisees and potential franchises understand their rights and responsibilities under the Code.

Application of the code

The Code imposes one set of obligations to all franchise agreements entered into, renewed, extended or transferred on or after 1 October 1998.

However, a small number of Code provisions will not apply to agreements entered into prior to 1 January 2015.

If the agreement was entered into:
The following do not apply:
Between 1 July 1998 and 29 February 2008
  • waiver of verbal or written representations by the franchisor (cl 20(1)(b))
  • prohibition on requiring actions or proceedings, including mediation, to be being brought in a State or Territory outside that in which the franchisee operates (cl 21(2))
  • costs of settling disputes (cl 22)
  • effect of restraint of trade clauses (cl 23).
Between 1 March 2008 and 31 December 2014
  • prohibition on requiring actions or proceedings, including mediation, to be being brought in a State or Territory outside that in which the franchisee operates (cl 21(2))
  • costs of settling disputes (cl 22)
  • effect of restraint of trade clauses (cl 23).

Importantly, a franchise agreement entered into prior to 1 January 2015 will be covered by the entire Code (including the provisions in the table above) if the agreement is renewed, transferred or varied in any way on or after 1 January 2015.

If you are uncertain about your rights and obligations under the Code, you should consider seeking legal advice.

Franchisors that are not required by the Code to comply with the provisions referred to above may, however, agree with their franchisees to be bound by those provisions.

A deed of variation can be signed by a franchisor and a franchisee to ensure all the rights and obligations under the Code apply to the franchise agreement, regardless of when they entered into their agreements. We can assist you with this.

Parties should seek independent legal advice prior to signing the deed of variation.

Tony McMinn

2015