The Franchising Code of Conduct is a mandatory industry code under Australian consumer law. Understanding its obligations matters whether you are entering, operating within, or exiting a franchise arrangement.
Franchising in Australia is regulated through the Franchising Code of Conduct (the Code), a mandatory code prescribed under the Competition and Consumer Act 2010. The Code applies to franchise agreements entered into, renewed, or extended in Australia, and sets out obligations for both franchisors and franchisees.
The Code is not optional. A franchise agreement that purports to contract out of the Code's requirements is unenforceable to that extent.
Disclosure obligations
Before entering a franchise agreement, the franchisor must provide the prospective franchisee with a disclosure document in the prescribed form.
The disclosure document must be provided at least 14 days before the franchise agreement is entered into, or before any non-refundable deposit is paid, whichever is earlier.
A franchisee who does not receive the required disclosure, or who receives a disclosure document that materially misrepresents the franchise, may have remedies under the Code and under the Australian Consumer Law.
The franchise agreement itself
The Code prescribes certain matters that must appear in a franchise agreement, and prohibits certain provisions.
The Code also addresses the circumstances in which a franchisor can terminate a franchise agreement, both for cause and without cause.
End of term and transfer
One area where the Code is often misunderstood concerns the rights of a franchisee at the end of the franchise term.
The Code does not give a franchisee a right to renew.
Transfer of a franchise is also regulated. A franchisor cannot unreasonably withhold consent to a transfer.
Dispute resolution under the Code
The Code establishes a dispute resolution process that applies before legal proceedings are commenced.