The code applies to franchise agreements entered into, renewed or extended on or after 1 October 1998. A franchise agreement is an agreement (either written, verbal or implied) between a franchisor and franchisee with the following characteristics:
the franchisor grants the franchisee the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the franchisor or an associate of the franchisor
the operation of the business will be substantially or materially associated with a trademark, advertising or commercial symbol that is owned, used, licensed or specified by the franchisor
the franchisee is required to pay, or agree to pay, a fee before starting or continuing the business.
A motor vehicle dealership agreement will also be taken to be a franchise agreement.
Under the code, franchisors and master franchisees (or sub-franchisors as they are sometimes known) must give a franchisee:
a copy of the code
a disclosure document in the required form
a franchise agreement in the form it is to be executed
at least 14 days before the franchisee enters into, renews or extends a franchise agreement or pays a non-refundable deposit in relation to a franchise agreement.
The code also requires that a franchisor:
informs the franchisee of any materially relevant facts about the franchise (for example, certain court proceedings) within 14 days after the franchisor becomes aware of them
gives a copy of a current disclosure document to the franchisee within 14 days after a written request to the franchisor, as long as only one request has been made within the last 12 months, not including a request made under a right of renewal.
2. Franchise agreements
The code requires that franchisors provide their franchisees with certain rights in relation to franchise agreements. In particular:
A franchisee may terminate a franchise agreement within 7 days after entering the agreement, or paying any non-refundable money, whichever is earlier. If the franchisee chooses to exercise their cooling-off rights, they must be given a refund minus any reasonable expenses incurred by the franchisor within 14 days.
A franchisor is prohibited from inducing franchisees or prospective franchisees not to form an association or associate with other franchisees or prospective franchisees for a lawful purpose.
A franchise agreement entered into on or after 1 October 1998 must not contain, or require a franchisee to sign a statement that releases the franchisor from general liability towards the franchisee.
A franchise agreement must not contain, or require a franchisee to sign, a waiver of any verbal or written representation made by the franchisor.
3. Dispute resolution
Every franchise agreement entered into on or after 1 October 1998 must set out a dispute handling procedure that complies with the code. Any party to a franchise agreement who has a dispute with another party to the agreement may engage the code’s dispute resolution procedure. The Mediation Adviser provides mediators for resolving disputes using the dispute resolution procedure set out in the code.
