Franchising in Australia is regulated through the Franchising Code of Conduct, a mandatory industry code prescribed under the Competition and Consumer Act 2010 (Cth). The Code sets obligations for both franchisors and franchisees, and it is not optional. A franchise agreement that purports to contract out of the Code is unenforceable to that extent.
Since 1 April 2025 there has been a new Code. The Competition and Consumer (Industry Codes—Franchising) Regulations 2024 (Cth) replaced the 2014 regulation that had governed the sector for a decade. Much of the architecture carried over, but the changes are real, and some of them shift risk between the parties in ways that matter at signing and again at exit.
Which code governs your agreement
The 2025 Code applies to franchise agreements entered into, transferred, renewed or extended on or after 1 April 2025. An agreement signed before that date, and not renewed or extended since, remains governed by the old 2014 code until something happens to it: a renewal, an extension, a transfer.
That transition rule catches people out. A franchisee three years into a five year term is still under the old code. Exercise the option to renew, and the new Code applies from that point. The same franchise system can have some outlets governed by one code and some by the other, which is worth confirming before anyone quotes the Code in a dispute.
A handful of the new provisions were phased in later, from 1 November 2025. Those included the enhanced capital expenditure disclosure, the specific purpose fund rules, and the return on investment and early termination compensation provisions discussed below. All are now in force for agreements caught by the new Code from that date.
What the 2025 Code changed
The headline change is that protections previously reserved for new vehicle dealership agreements now apply across the sector. Under the old code, only motor vehicle dealers were entitled to a reasonable opportunity to make a return on their investment during the term, and to compensation if the agreement was terminated early because the manufacturer withdrew from Australia or restructured its network. The 2025 Code extends both concepts to franchising generally.
So a franchise agreement entered into, renewed or extended from 1 November 2025 must provide the franchisee with a reasonable opportunity to make a return on investment during the term. What counts as reasonable is not defined, and it will take time (and probably litigation) before the boundary is clear. But a short term paired with a heavy fitout obligation now invites scrutiny it did not attract before.
The same agreements must also provide for compensation if the franchisor terminates early because it is withdrawing from the Australian market, rationalising its network, or changing its distribution model. That includes buying back or compensating for outstanding stock and branded or specialty equipment that cannot be repurposed. Franchisors who once treated network restructures as a cost borne by franchisees can no longer draft on that assumption.
Other changes are more mechanical. The key facts sheet, a short summary document introduced in 2021, has been abolished, with its content folded back into the disclosure document. The old rules on marketing funds have been broadened into rules about specific purpose funds, covering any fund a franchisee is required to pay into, not just marketing. Those funds must be accounted for annually and audited unless the contributing franchisees vote otherwise.
There is also a new opt out. A prospective franchisee who has, or recently had, another franchise agreement with the same franchisor that is the same or substantially the same can elect in writing to forgo the disclosure document and the cooling off period. It is a sensible concession to experienced multi-site operators. It is also something a franchisee should decline unless they genuinely know the system, because the rights being waived exist for a reason.
Disclosure before you sign
The core disclosure machinery is familiar. Before entering a franchise agreement, the franchisor must give the prospective franchisee a disclosure document in the form prescribed by the Code, together with the proposed agreement in final form and a copy of the Code itself. These must be provided at least 14 days before the agreement is signed or any non-refundable money is paid.
The franchise disclosure document is the single most useful thing a prospective franchisee receives. It covers the franchisor's corporate history, litigation, the experience of existing and former franchisees (with contact details), site or territory arrangements, the costs of getting in and getting out, and now, under the 2025 Code, more detailed disclosure of any significant capital expenditure the franchisee will be expected to make: the rationale for it, the amount and timing, and the anticipated outcomes and risks. Franchisors must also keep the document current, updating it within four months after the end of each financial year.
Alongside the document sits the Franchise Disclosure Register, a free public register maintained by the Commonwealth at franchisedisclosure.gov.au. Franchisors must create a profile and confirm or update their information annually, by 14 November each year. The register lets a prospective franchisee check a franchisor's details, and in many cases read disclosure material, before ever approaching the franchisor. It is a good first step, and the ACCC has already penalised franchisors for failing to keep their register entries current.
A franchisee who did not receive the required disclosure, or who received a document that materially misrepresented the business, may have remedies under the Code and under the Australian Consumer Law. A 14 day cooling off period also applies after signing, during which the franchisee can walk away.
The agreement itself
The Code prescribes matters a franchise agreement must contain and provisions it must not. Two prohibitions deserve particular attention under the 2025 Code.
The first concerns restraints of trade. The old code said that a restraint clause had no effect in certain end of term circumstances, broadly where the franchisee had wanted to renew, was not in serious breach, and received no genuine compensation for goodwill. The new Code goes further: a franchisor is now prohibited from including such a clause in the agreement at all, and from relying on one. What was a shield for franchisees is now a civil penalty provision aimed at franchisors, and existing precedent agreements drafted under the old code need to be checked against it.
The second concerns capital expenditure. A franchisor must not require a franchisee to undertake significant capital expenditure during the term unless it falls within the narrow categories the Code allows, principally expenditure disclosed before the agreement was entered into. The 2025 Code adds the obligation to discuss that expenditure with the franchisee and set out its rationale and risks in writing. Mid-term refurbishment demands are a recurring source of franchise disputes, and the disclosure given at the start is usually where those disputes are won or lost.
Termination and the end of the term
The Code regulates how and when a franchisor can terminate, both for breach (which requires notice and a reasonable opportunity to remedy) and in special circumstances such as fraud, abandonment or insolvency, where seven days' notice applies. The 2025 Code expanded those special circumstances to include certain serious contraventions of the Fair Work Act and the Migration Act by the franchisee.
One point is often misunderstood: the Code does not give a franchisee a right to renew. What it requires is end of term notice, at least six months before expiry, stating whether the franchisor intends to renew or enter a new agreement. Transfer is regulated too. A franchisor cannot unreasonably withhold consent to a transfer of the franchise, and consent is taken to be given if not refused with reasons within the prescribed time.
Resolving disputes
The Code sets out a dispute resolution process that applies before court proceedings, and it survives largely intact in the 2025 Code. Either party can give a notice of dispute, the parties must attempt to resolve it, and failing that the dispute can go to mediation or conciliation, commonly arranged through the Australian Small Business and Family Enterprise Ombudsman. Arbitration is available if both sides agree. The process is genuinely used, and most franchise disputes settle within it.
Penalties and enforcement
The ACCC enforces the Code, and the 2025 version gives it more to work with. Nearly all substantive obligations are now civil penalty provisions. Most attract a maximum of 600 penalty units per contravention, and the most serious breaches, including failing to disclose materially relevant facts, carry penalties that scale with the franchisor's size, starting at $10 million for a body corporate. The ACCC can also issue infringement notices and has shown a willingness to pursue register and disclosure failures, not just conduct at the dramatic end.
For franchisors, the practical task is bringing precedent agreements and disclosure documents into line with the 2025 Code before the next round of renewals. For franchisees, it is knowing which code governs the agreement in front of them and reading the disclosure document against the register before committing. The Code rewards the party who did the work early.
DOCET LEGAL reviews franchise agreements and disclosure documents against the current Code, on either side of the arrangement, and can set out the Code obligations that apply to yours. This article is general information, not legal advice; the Code turns on detail, and the detail turns on your agreement.