Navigating the Unfair Contract Terms Review: What Franchisors and Franchisees Need to Know

As the Treasury embarks on its review of the amended Unfair Contract Terms (UCT) protections that kicked off in November 2023, franchisors and franchisees in Australia are wise to pay close attention. This review isn't just regulatory housekeeping—it's a chance to shape how these laws play out in the real world of business relationships. For those in the franchising sector, where contracts often dictate everything from day-to-day operations to long-term growth, understanding the UCT regime can mean the difference between smooth sailing and costly disputes. The Government has signalled its intent to extend these protections to all franchising arrangements, building on the recent update of the Franchising Code of Conduct, which took effect on 1 April 2025 (with some parts starting 1 November 2025). In this article, we'll break down the key issues and offer insights to help you stay ahead.

Why This Review Matters to Your Franchise

The UCT protections aim to level the playing field in standard form contracts—those pre-packaged agreements where one party has little room to negotiate. Since the 2023 amendments, these rules have broader reach and sharper teeth, targeting unfair terms that could disadvantage consumers or small businesses. For franchisors, this means scrutinising your standard agreements more closely to avoid penalties. For franchisees, it's about knowing your rights when signing on to a system that promises support but might include hidden gotchas.

This review comes at a pivotal time. The Franchising Code's update already beefed up fairness requirements, like better disclosures, return on investment requirements, limitations on restraints to name a few. Now, with the UCT spotlight on franchising, the focus is on ensuring all players—from single-store owners to multi-site operators—get adequate safeguards without stifling legitimate business needs. If you're in franchising, these changes could affect how you draft, negotiate, or enforce contracts, potentially saving or costing you thousands in compliance or litigation.

The Basics and Big Shifts

At its core, the UCT regime voids terms in standard form contracts that create a significant imbalance, aren't reasonably necessary for the advantaged party's legitimate interests, and cause detriment if enforced. It seeks to protect consumers and small businesses from one-sided clauses, like those allowing unilateral changes without notice.

The November 2023 amendments supercharged this framework. First, civil penalties were introduced—up to $50 million for companies or 30% of turnover for serious breaches—making non-compliance a real financial risk. Enforcement bodies like the ACCC gained more tools, including injunctions to stop unfair terms in their tracks.

The small business definition expanded dramatically: now covering businesses with fewer than 100 full-time equivalent employees or under $10 million in annual turnover. The upfront price threshold was scrapped for most contracts under the Australian Consumer Law (ACL), pulling in more deals without that old $300,000 cap. For financial products under the ASIC Act, the threshold rose to $5 million.

Litigation is picking up, too. A recent Federal Court case, AghaeiRad v Plus500AU Pty Ltd (Stay Application) [2025] FCA 1602, shows class actions gaining traction over UCT issues. But with the laws so new, case law is thin. This scarcity means businesses are navigating uncertainty, often turning to lawyers for proactive reviews.

Which Franchise Agreements Fall Outside Current Protection?

Most franchise agreements qualify as standard form contracts because they're drafted by the franchisor and offered generally on a take-it-or-leave-it basis or allowing for certain tweaks for individual franchisees, which will rarely change that classification. The expanded small business thresholds mean the vast majority of single- or small-multi-site franchises are now covered, giving franchisees stronger leverage against unfair terms.

However, some setups slip through. Multi-site agreements, where a franchisee operates several locations and exceeds the $10 million turnover threshold, might not qualify. Similarly, certain automotive dealerships—often larger operations—could fall outside due to their scale. In these cases, there's typically less of a power imbalance; these franchisees have more bargaining clout and resources compared to a startup running one coffee shop.

That said, the Government's push seems to be on seeking to capture all franchising arrangements under UCT. Whether that's needed for these bigger players is up for debate—after all, the Franchising Code arguably already imposes robust obligations on franchisors across the board.

Key Question: ACL Amendments or Franchising Code Updates?

One big debate in the review is where to house expanded UCT protections: in the broad Australian Consumer Law (ACL) or the industry-specific Franchising Code? The ACL offers a universal safety net, but franchising has unique dynamics—like system-wide standards—that a general law might not fully address.

Placing rules in the Franchising Code makes sense for practicality. It keeps all franchise obligations in one spot, making it easier for franchisors and franchisees to understand their rights without flipping between statutes. This avoids duplication and ensures reforms tie directly into existing Code requirements, like disclosure or good faith dealing.

If the ACL route is chosen, a "safe harbour" provision could be essential. This could shield terms required or aligned with the Franchising Code from being deemed unfair under UCT. UCT isn't a one-size-fits-all solution; franchising thrives on standardised systems that balance individual and network interests. Tailoring protections recognises that what works for a retail lease type franchise might not suit a branded online or mobile service type franchise.

Franchise-Specific Terms 

Franchise contracts often include terms that might look unfair at first glance but are crucial for maintaining a cohesive brand and protecting the entire network, however how far they go may turn what is reasonable into what is very much unfair. Furthermore, it needs to be kept in mind that  Franchising is multilateral—one franchisee's actions ripple across the system. A term that seems tough on one party might prevent system-wide problems, like inconsistent standards eroding trust. Courts assessing unfairness should consider this network effect.

Furthermore, a potential further area of confusion is where  ACL examples of unfair terms may clash with Franchising Code requirements or allowances. For example, the Franchising Code permits terminations with 7 days' notice for serious issues, such as Fair Work Act contraventions (see section 57). A franchisee breaching labour laws could justify quick action to protect the brand, yet it might flag as unfair under UCT without context.

More tailored guidance is urgently needed. The ACCC's December 2023 report on franchise UCT issues—was a solid start, but needs updating  with the amendments and new Code. Potentially updating and embedding it in the Code, or having best practice guides and education on UCT and promoting it widely, would clarify dos and don’ts. Implementing this would help everyone: a voided term doesn't just affect two parties; it disrupts the whole ecosystem.

Key Takeaways and Recommendations

The review highlights some valid concerns, but we suggest it's too early to judge full impacts with scant case law, and franchising needs bespoke rules over blanket ACL tweaks. Conflicts between the ACL and Code create grey areas.

For now, don't wait for reforms. Review your agreements and systems against UCT and the new Code. Keep in mind that while some changes won’t impact some older existing agreements entered into before the relevant law changes,  any new agreements entered into after these law changes or any variation, renewal to older agreements since the law changes, may trigger their application.

At Advantage Partners Lawyers, we specialise in franchising and consumer law, helping clients navigate these waters with practical, plain-English advice. Whether you're a franchisor tightening compliance or a franchisee seeking stronger protections, contact us to discuss how we can support your business.

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