Franchising

Disclosure document

The Code requires you to maintain a disclosure document. You are required to provide a disclosure document to a person proposing to enter into, renew or extend a franchise agreement.

The purpose of a disclosure document is to give a prospective franchisee key information about the franchise system, and an existing franchisee current information about the running of the franchise.

Information you are required to disclose includes:

Information statement

When a person proposes to enter into a franchise agreement for the first time (as opposed to renewing or extending an existing agreement), you must provide them with a copy of the information statement contained in Annexure 2 of the Code. The information statement is a generic statement that highlights the risks and rewards of franchising.

The information statement should be provided to the prospective franchisee as soon as practicable after they formally apply, or express an interest in, acquiring a franchised business.

ACCC helping franchising sector to get ready for the new code

The Australian Competition and Consumer Commission is helping the franchising sector to understand the new Franchising Code of Conduct ahead of its 1 January 2015 start date.

From 1 January 2015, the current Franchising Code will be repealed and replaced with a new Code which will apply to all franchise systems operating in Australia.

To help franchisors, current and prospective franchisees and their professional advisers to make sense of the new Code, the ACCC will be hosting a free interactive live webinar on 9 December 2014 at 12:00pm.

Federal Court declares cleaning franchisor engaged in unconscionable conduct

The Federal Court has declared that South East Melbourne Cleaning Pty Ltd (in liquidation) (formerly Coverall Cleaning Concepts South East Melbourne Pty Ltd) (Coverall Melbourne) engaged in unconscionable conduct in contravention of the Australian Consumer Law following action by the Australian Competition and Consumer Commission.

Coverall Melbourne was the Victorian franchisor of a national franchise system that establishes and operates professional cleaning services.

Proposed franchising powers set to boost code compliance

The game is set to change for operators engaging in serious breaches of the Franchising Code of Conduct with proposed enforcement powers increasing the stakes on 1 January 2015.

Based on the exposure draft of the new Code released in April 2014, the Australian Competition and Consumer Commission will be able to issue infringement notices of up to $8,500 and seek penalties up to $51,000 in the Federal Court for contraventions of the Code.