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Franchise Legal Update

By May 27, 2021No Comments
Franchise Legal Update

Late last year the Australian Government announced significant proposed amendments to the Franchising Code of Conduct by presenting an Exposure Draft for comment with this amended Code proposed to commence 1 July 2021.

The final version of this Code has not been released and is now unlikely to be enacted until later this year. There may or may not be a grace period to allow franchisors to comply with the amended Code.

Amongst the changes proposed to the Code are:

  • Disclosure of the nature of Franchisor received rebates and as to whether these rebates will be shared with Franchisees
  • Franchisors not being able to recover the legal costs of preparing a Franchise Agreement
  • Improved marketing fund disclosure
  • Cooling off period to be 14 days rather than 7 days
  • Franchisees being able to negotiate early exits from a Franchise Agreement
  • Restraint clauses will be most difficult to enforce
  • New dispute resolution provisions
  • Doubling of penalties for Code breaches

Franchisors and their legal advisors should now be on standby for the release of this amended Code as not only will there be significant changes to Disclosure Documents but also existing versions of Franchise Agreements will have to be reviewed and updated as necessary.

At the time of presentation of the Exposure Draft there was also a great deal of interest in introducing conciliation [in addition to mediation] for dispute resolution.

Contact Richard Solomon Commercial Lawyers on (08) 8232 3300 or richard@richardsolomon.com.au for any franchise enquiries.

Richard has been a member of the Franchise Council of Australia since 1989.