Changes To The Franchising Code of Conduct: You Need To Know & Action Now!

You may not know this, but all Disclosure Documents issued by franchisors on or after 1st November 2021, must be updated to reflect the new Franchising Code of Conduct changes.

This being one of the  many changes made to the Code earlier this year, where not all changes came in at one time, but they are basically all in now.

It is therefore essential that you as a franchisor have updated all your documents and internal processes, in line with the current Code as to be compliant.

If you don’t act, you risk being penalised financially (and as well as big brand damage to you and your Business), with a recent amendment to increase the potential maximum penalty for Code breaches by corporations up to the greater of $10 million, 10% of annual turnover or 3x value of benefit obtained from offence.

Briefly just some of these changes include:

-          new documents, such as the Key Fact Statement that needs to be prepared and issued;

-          new Information Statement to be provided as soon as a potential franchisee expresses interest in becoming a franchisee;

-          a new format Disclosure Document requiring extra disclosures;

-          changes to the cooling off arrangements where franchisees can exit the Franchise Agreement without giving any reason both in  terms of when it will apply (now also for sales of existing franchise businesses- this being new and creates extra steps and considerations you need to go through to ensure you are properly protected and reduce potential costly disasters/complications) and extending the cooling off period to 14 days;

-          restrictions and extra processes around being able to terminate franchise agreements (not as easy as it previously was);

-          additional rights for franchisees to seek early termination;

-          changes to the Dispute Processes, including introduction of new processes and/or rights;

-          additional processes and disclosures around significant capital works a franchisee can be expected to be liable for;

-          restrictions on costs Franchisees may be liable to pay;

-          additional processes and disclosures around marketing funds;

If you are in a position where your legal and business documents and internal processes have not been updated in line with the Code, you must act urgently as you are at risk of potential fines and brand damage.

To learn more get in touch now with us at Advantage Partners Lawyers, your trusted advisor in business, franchising and law. Our goal is to give you the advantage.

Please note that this Update is a general and brief update, it does not purport to be comprehensive legal advice relevant to your circumstances. Consequently, specific legal advice for each of your circumstances should be obtained first with one of our lawyers before taking or not taking any action in respect to this area.