During a franchise agreement

  • Franchising agreements can go for a long time and there are obligations on both sides.
  • Franchisors must give franchisees specific information and documents during the agreement. This includes when there are changes to the franchise, when ownership is changing, and about the marketing fund if there is one.

Franchisors must keep franchisees informed

Franchisors are obliged to give franchisees certain information and documents during a franchise agreement. This includes the disclosure document if franchisees ask for it.

Franchisors must tell franchisees about:

Changes to the franchise that are materially relevant

During a franchise agreement, franchisors must keep franchisees up to date about certain important information that the Franchising Code of Conduct calls materially relevant facts.

Changes in ownership of the franchise

Franchisors should keep franchisees informed if they are selling or leaving the franchise.

A materially relevant fact that franchisors have to tell franchisees about is a change in:

  • majority ownership or
  • control of the franchisor, an associate of the franchisor, or the franchise system.

If you are looking for information about what happens at the end of a franchise term, see extending or ending a franchise agreement.

Activity and operations of a marketing fund

If a franchisor asks franchisees to pay money into a marketing fund, the franchising code has rules about paying into the fund and how the fund can be used.

Franchisors have to tell franchisees about:

  • the money that goes into and out of the marketing fund each financial year. This information is given to franchisees in an annual marketing fund statement.
  • how they operate the marketing fund. This information must be included in the disclosure document.

Leasing information

Franchisors must give franchisees certain information if they are occupying or leasing premises for their franchise from the franchisor or an associate of the franchisor. This includes telling the franchisee about any incentives or financial benefits that the franchisor or associate of the franchisor is entitled to because of a lease arrangement.

Changes due to events

Unprecedented events, such as COVID-19, mean change happens quickly for some franchisors.

Franchisors must keep franchisees informed of changes due to COVID-19 or other events, and should not wait for annual disclosures to disclose certain information.

Franchisors and franchisees must follow the franchise agreement and laws

Franchisors must not engage in misleading and deceptive conduct or unconscionable conduct during the franchise agreement. This also applies to franchisees when dealing with consumers.

Both parties must act in good faith during the franchise agreement.

The franchise agreement must be followed by both parties. The franchisor can’t change the agreement unless the franchise agreement allows it or the franchisee agrees to the change.

Franchisors must not interfere if franchisees want to associate

The franchisor can’t interfere with franchisees associating with each other. This includes bargaining together and is a protection that franchisees have under the franchising code.

Two or more franchisees may also want to come together to negotiate with their franchisor about terms, conditions and prices. This is collective bargaining.

Bargaining as a group can risk breaching competition laws. There are different ways that franchisees can get legal protection from the ACCC if they decide that they want bargain together.

See also

Documents a franchisor must give a franchisee during their agreement

During the franchising agreement, franchisors must give franchisees certain information and documents that are updated, created or requested.

Franchise marketing funds

It’s common for franchisees to have to pay a marketing fee to the franchisor, in addition to royalty fees.

Group bargaining by franchisees

Collective bargaining is when 2 or more franchisees come together to negotiate terms, conditions and prices with their franchisor.

Franchise system change of ownership

During a franchise agreement, the franchisor may want to sell or leave the franchise system.

Franchising during COVID-19

The COVID-19 pandemic has created financial and operational challenges for businesses. For many in the franchising sector, it has not been business as usual.