The Federal Government has recently announced its support for several recommendations made following the 2023 review of the Franchising Code of Conduct.
New draft code coming in 2024
A new draft of the Franchising Code will be released later in 2024 and is expected to be implemented from April 2025.
The Australian Competition and Consumer Commission (ACCC) submission to the review raised several concerns, including that many franchisees did not fully understand their rights, that there was no fully binding alternative dispute resolution, and that the existing Code did not provide the ACCC with sufficient powers to intervene.
The ACCC proposed a licensing system for franchisors which would require franchisors to be licensed to offer franchises to combat persistent issues and the Government has now committed to review, in consultation with the franchise sector, moving to a licensing system for the protection of franchisees.
Accepted recommendations from the review
Some of the proposals accepted by the Government following the review include:
- Reviewing the Code in five-year cycles
- Simplify and consolidate pre-entry information given to prospective franchisees
- Simplify franchisor obligations under the Code
- Simplify provisions relating to termination of agreements due to serious breaches
- Create an online government resource website
- Allow franchisees to see a ‘no adverse costs’ order when bringing a matter against a franchisor for breaching the Code
- Increase the scope of penalties under the Code
- Investigate the feasibility of introducing a licensing regime to better regulate most aspects of the franchisee-franchisor relationship
Anticipated impact on franchisors
The adoption of these recommendations has the potential to lead to huge improvements in franchisor-franchisee relationships. However, they will increase the admin burden on franchisors.
Franchisors should therefore be prepared for major updates to their franchising documentation in 2025, with some initial changes potentially required this year.
How GLG Legal can help
To navigate this new franchising landscape, make an appointment with one of our business and commercial law specialists at GLG Legal. Call our office on: (07) 3161 9555 or email: info@glglegal.com.au