Franchising Code Amendments: In force 1 July 2021

On 1 July 2021 amendments to the Franchising Code of Conduct took effect. A copy of the legislation can be found.

The changes will impact franchisors and franchisees. If you are a franchisor or existing franchisee or are looking at entering into a franchise agreement, it is important you are aware of how the changes may impact you.  Below is a summary of some of the significant changes.

Franchising Code Amendments: Takeaways

• Agreements entered into, renewed or extended on 1 July 2021 or after will be required to comply with the amended Franchising Code.
• Disclosure Documents will not require changing until 1 November 2021, however changes to the disclosure process, information statement and the introduction of a ‘key fact sheet’ take place from 1 July 2021.

Summary of Changes

Disclosure process:

From 1 July 2021 new requirements apply to the issuing of disclosure documents and franchise agreements. In particularly, franchisors will be required to develop a new Key Facts Sheet (a short form summary of the disclosure document).  A ‘smart form’ for the Key Facts Sheet can be accessed here.

Additionally:

• An Information statement: must be provided (in the form approved by the ACCC) to the franchisee before the disclosure document and franchise agreement is provided.
• Additional information will need to be disclosed in the disclosure document to franchisees or prospective franchisees (including about dispute resolution, capital expenditure, rebates good will, restraints, leases and in some circumstances earnings).
• A copy of the lease of the premises must be provided where the premises are leased to the franchisor but the franchisee will receive a sublease or licence to occupy.

Amendments that expressly require changes to be made to disclosure documents will apply to disclosure documents given to franchisees from 1 November 2021.

It is expected that in the near future, a Franchise Disclosure Registry will be established which will likely include a public register.  Franchisors should keep in mind that their disclosure documents may be displayed publicly.

Capital Expenditure:

Franchisors will be required to provide additional details regarding capital expenditure.

These changes apply to agreements entered into, extended or renewed after 1 July 2021.

Dispute Resolution:

Most of the changes to the dispute resolution process occurred on 2 June 2021.

The following avenues are now available for resolving a dispute under a franchise agreement:

• conciliation is now available (in addition to mediation);
• where the parties agree, arbitration may be used;
• a specific procedure is provided for multiple franchisees to engage in a multi-party dispute together

Cooling Off Period

Cooling off periods have been extended to 14 days (previously 7).  Additionally, the events that trigger the cooling off period have been amended to be when all necessary information has been received by the franchisee.

Termination

A new termination right will be introduced for franchisees to propose early termination of the franchise agreement. This offers franchisees a way out of the network (whether due to financial hardship or other reasons).

How Ramsden Lawyers can assist

We are currently offering Franchisors’ a fixed fee to update your franchise documents.

For more information or direct assistance with updating your franchise agreement and disclosure document, please contact our commercial team on 1300 749 709.