The current franchising code will be repealed and replaced with a new Franchising Code of Conduct from 1 January 2015.
Key changes in the new code
The new code will:
- introduce an obligation for franchisors and franchisees (including prospective franchisees) to act in good faith towards one another in all their dealings
- introduce financial penalties and infringement notices for breaches of certain provisions of the code
- require franchisors to provide prospective franchisees with a short information sheet which outlines the risks and rewards of franchising
- require franchisors to set up a separate account for marketing fund money, and to provide greater transparency around the use of marketing funds
- require additional disclosure about the ability of the franchisor and a franchisee to sell online
- prohibit franchisors from imposing significant capital expenditure, except in limited circumstances.
Application of the code
The new code will apply to all franchise agreements renewed, extended or transferred on or after 1 October 1998. However, a small number of provisions (the 'carve-outs') will not apply to agreements entered into prior to 1 January 2015.
If you are uncertain about your rights and obligations under the new code, you should consider seeking legal advice from a solicitor with franchising expertise.
Deed of variation
Franchisors that are not required by the code to comply with the carve-outs may voluntarily agree to be bound by those provisions.
The ACCC has developed a deed of variation that franchisors and franchisees can sign to ensure all the rights and obligations under the code apply to their franchise agreement, regardless of when they entered into the agreement.