2023 Review of the Franchising Code - Government Response

Recommendation 1: The Australian Government should ensure the provision of more comprehensive, robust statistics about the franchising sector.

Recommendation 2: The Code should be remade, largely in its current format.

Recommendation 3: A clear statement of purpose should be inserted into the Code.

Recommendation 4: Service and repair work conducted by motor vehicle dealerships should be explicitly captured by the Code.

Recommendation 5: Reviews of the Code should be conducted in five yearly cycles in the future.

Agree Once a decision on licensing occurs, the Government will revisit enhancements to data collection.

Agree The Government will remake the Code, having regard to the changes recommended by the Review.

Agree When remaking the Code, the Government will insert a clear statement of purpose.

Agree The Government will clarify that service and repair work performed by motor vehicle dealerships is within the scope of the Code.

Agree The Government agrees there should be future statutory reviews of the Code every 5 years. 

Recommendation 6: Simplify and consolidate the pre-entry information given to prospective franchisees.

Recommendation 7: Franchisor obligations under the Code in relation to existing franchisees should be simplified.

Recommendation 8: The existing requirement that new vehicle dealership agreements must provide a reasonable opportunity to make a return on investment should be extended to all franchise agreements.

Recommendation 9: The existing requirement that new vehicle dealership agreements must include provisions for compensation for franchisees in the event of early termination should be extended to all franchise agreements.

Recommendation 10: Enhance the public visibility and usage of the Franchise Disclosure Register.

Recommendation 11: Additional information should be included on the Franchise Disclosure Register relating to dispute resolution and adverse actions brought by enforcement agencies.

Agree The Government will amend the Code to merge the Key Facts Sheet into the disclosure document.

Agree When remaking the Code the Government will simplify disclosure obligations in relation to existing franchisees.

Agree When remaking the Code, the Government will extend the obligation that a franchise agreement must provide a reasonable opportunity to make a return on investment to all franchise agreements.

Agree When remaking the Code, the Government will extend the obligation that franchise agreements must include provisions for compensation to franchisees in the event of early termination to all franchise agreements.

Agree Once a decision on licensing occurs, the Government will consider if there are other initiatives.

Agree The Government agrees there may be value in requiring the inclusion of additional information on the Franchise Disclosure Register.

Recommendation 12: Franchise systems should be encouraged, through education, to consult franchisees regarding any major change to the business model during the term of the franchise agreement.

Agree The Government will require the ASBFEO to lead the development of best practice guidelines in consultation with the sector and the ACCC.

Recommendation 13: Provisions relating to the termination for serious breaches should be simplified. Changes made in 2021 relating to termination under clause 29 of the Code should be revisited.

[Franchising Code Amendments - Termination]

Recommendation 14: Best practice guidance should be provided to franchisees and franchisors regarding franchisee-initiated exit, to enhance the effectiveness of clause 26B of the Code.

Recommendation 15: Further work should be done to limit the use of unreasonable restraints of trade in franchise agreements.

[What is a Restraint of Trade?]

Agree While considering the importance of protections for franchisees, the Government will work with the sector to simplify termination provisions relating to serious breaches by franchisees.

Agree The Government will require the ASBFEO to lead the development of best practice guidance, in consultation with the sector and the ACCC.

Agree The Government will direct the Competition Taskforce to consider how restraints of trade and other uncompetitive terms in franchise agreements may be affecting franchise workers, as part of the Taskforce's review into the use of non-compete and related clauses that restrict workers from shifting to a better paying job.

Recommendation 16: A comprehensive online government resource should be created, in the nature of ASIC's MoneySmart website.

Recommendation 17: Australian Government agencies should work with relevant sector participants to improve standards or conduct in franchising by developing best practice guidance and education.

Recommendation 18: ASBFEO should be given additional powers to name franchisors who have not participated meaningfully in alternative dispute resolution.

Recommendation 19: The Australian Government should assist access to low-cost legal advice on prospects prior to formal ADR.

Recommendation 20: The Australian Government should consider an appropriate role for franchise interests when implementing its commitment to a designated complaints function for the ACCC.

Recommendation 21: Franchisees should be able to seek a 'no adverse costs' order against a franchisor for breach of the Code or the Australian Consumer Law.

Recommendation 22: The scope of penalties under the Code and associated investigation powers and infringement notice regime in Part IVB of the Competition and Consumer Act 2010 should be increased.

Recommendation 23: The Australian Government should investigate the feasibility of introducing a licensing regime to better regulate most aspects of the franchisee-franchisor relationship.

Agree in principle Once a decision on licensing occurs, the Government will revisit creating an online resource on franchising.

Agree The Government will require ASBFEO to lead the development of best practice guidance in consultation with the sector and the ACCC.

Agree The Government will amend relevant legislation to provide ASBFEO with the power to publicly name franchisors that fail to participate meaningfully in alternative dispute resolution.

Agree The Government will expand the ASBFEO's Tax Concierge Service to support small businesses to access low-cost legal advice.

Agree There will be a process for interested parties that represent the interests of small businesses (such as franchisees) to apply to become a designated complainant.

Agree The Government will consult further on extending arrangements for seeking access to 'no adverse cost orders' for franchising matters to assess the efficacy of such arrangements in the context of the administration of justice and ensure there are no unintended consequences.

Agree The Government will consider the suitability of increasing the amount of penalty units to 60 penalty units for infringement notices issued under the CCA for a breach of the Code.

Agree The Government will establish a Taskforce in Treasury to conduct a comprehensive analysis of introducing a licensing regime for the franchising sector.

The Taskforce will consult widely and provide advice to Government.