Franchising update – how will the proposed Code changes affect you?

Following on from last year’s review of the Franchising Code of Conduct by Mr Alan Wein (see here), the Government has recently released an exposure draft of amendments to the Franchising Code of Conduct and relevant provisions in the Competition and Consumer Act 2010 (‘the CCA’), along with a ‘Future of Franchising’ statement on the policy reforms.

Although the implementation of the Wein report recommendations was expected, the drafting of the amendments goes beyond what the Wein report provided and has therefore been the cause for some concern.

For your reference, the key amendments to the Code include:

  1. The inclusion of penalty provisions for breaches of the Code of up to $51,000 (including the ability for the ACCC to issue an infringement notice of up to $8500 without obtaining a court order);
  2. Deleting the Annexure 2 short form disclosure document;
  3. A provision requiring franchisors to provide a risk statement to franchisees;
  4. Inserting an obligation for parties to a franchise agreement to act in good faith, including a requirement that the parties act honestly and not arbitrarily and cooperate to achieve the purposes of the franchise agreement. The amendments include penalty provisions where a party is found to not have acted in good faith;
  5. A provision which effectively requires dispute resolution to be conducted in the state where the franchisee is based, not where the franchisor is based;
  6. A provision modifying restraints of trade clauses in franchise agreements which allow franchisees (in certain circumstances) to continue to operate as an independent after the end of the franchise agreement.

There are also numerous other amendments that have been made. The new Code has been reformatted and renumbered so it is not easy to compare it to the old Code. New additions to the disclosure document requirements mean that additional sections will be included in the disclosure document and the numbering in the disclosure document must be updated.

There is the opportunity for yet more feedback on the draft legislation with submissions closing on 30 April 2014. Unfortunately this allows little time to respond, especially given the upcoming Easter holiday period. We will be closely monitoring the submissions regarding the amendments to the draft Code and will provide updates regarding the finalised Code provisions.

You can visit the Australian Government’s Treasury website for more information on the Code amendments, how to make your submission of feedback and access to the Future of Franchising statement. Please see the links below, or don’t hesitate to contact Peter McLaughlin on (07) 3223 6100 or email peterm@redchip.com.au to discuss any aspect of this Franchising Code of Conduct review.

View the government’s summary of the exposure draft and information on making your submission for comment: http://www.treasury.gov.au/ConsultationsandReviews/Consultations/2014/Franchising-Code

View the Future of Franchising Statement and the government’s Impact Statement examining the costs and benefits of the changes: http://www.treasury.gov.au/Policy-Topics/Business/Small-Business/Codes-of-conduct/Franchising/2014-Future-of-Franchising-Reforms

View the current Franchising Code of Conduct and further information on the Franchising Code of Conduct: http://www.treasury.gov.au/Policy-Topics/Business/Small-Business/Codes-of-conduct/Franchising

Back to Articles

Recent Articles

I’ll always be here for you dad!
Video | Fulfilling advisers’ Best Interests Duties

In this 5 minute video, Ian Tindale breaks down the steps financial advisers are required to take in regards to their clients’ Estate Planning in order to fulfil their Best Interests Duty.

Read more
Video | From business start-up to exit: Key decisions and the tax implications

This webinar uses a case study to highlight some of the key decisions throughout the lifecycle of a business, considering the variables from a tax and commercial perspective.

Read more
Fighting the Groundhog Day Blues

For many business owners and advisers, the first quarter of the new year can often feel like Groundhog Day – same challenges, same goals, same issues and same plan as every other year. Let’s not sap our energy trying to get amped about the same-old same-old.

Read more