2023 Review of the Franchising Code - Government Response
On 7 May 2024, the Minister for Small Business, the Hon Julie Collins MP, released the Australian Government's response to the Independent Review of...
The Federal Government released its response to the Fairness in Franchising Report on 20 August 2020.
In its response, the Federal Government proposed a number of amendments to the Franchising Code of Conduct (the Code).
The Government also announced the introduction of a Key Disclosure Information Fact Sheet to the disclosure process and proposed amendments to the Information Statement set out in Annexure 2 of the Code.
Contents
Non Financial Disclosure
Financial Disclosure
Supply Arrangements and Rebates
Cooling Off
Capital Expenditure
Marketing and Cooperative Funds
Dispute Resolution
Exit Arrangements
Termination
Restraint of Trade Clauses
Penalties
Legal Costs
In response to the principle that prospective franchisees should be able to make reasonable, informed assessments of the value (including costs, obligations, benefits and risks) of a franchise before entering into a contract with a franchisor, the Government proposed in its response to the Fairness in Franchising Report, the following amendments to the Code in relation to non-financial disclosure:
The Parliamentary Joint Committee on Corporations and Financial Services (the Parliamentary Joint Committee) noted our submission in relation to earnings information in the Fairness in Franchising Report.
The Government in its response to the Fairness in Franchising Report indicated that it proposed to amend the Code to require that:
The Parliamentary Joint Committee noted in the Fairness in Franchising Report that “It is fundamentally important for prospective franchisees to be able to make an informed appraisal of the true cost of goods in order to assess the profitability of a business, especially when both royalties and rebates are applied simultaneously”.
In response, the Government indicated that it proposed to amend the Code to require further disclosure of supplier rebates and commissions, and in particular to require that:
To allow a franchisee reasonable time to complete all due diligence the Government in its response to the Fairness in Franchising Report indicated that it proposed to amend the Code to extend the cooling off period to 14 days and broaden the type of transaction subject to cooling off provisions. In particular it proposed that:
The Government proposed to strengthen franchisees’ rights when a demand for significant capital expenditure is made by extending the recent amendments to the Code applying to the automotive sector to all sectors. In particular:
In response to the principle set out in the Fairness in Franchising Report that each party to a franchise agreement should be able to verify that the other party is meeting its obligations under the franchise agreement, the Government proposed to amend the Code to:
In response to the principle set out in the Fairness in Franchising Report that where there is a dispute, the dispute resolution process should be fair, timely and cost effective for both parties the Government proposed to amend the Code to:
In response to the principle that franchisors and franchisees should be able to exit the franchise agreement in a way that is reasonable and fair for both parties, the Government indicated that it would:
The Government announced that it would require a franchisor to provide seven days’ notice for termination in special circumstances. Currently a franchisor is able to terminate a franchisee immediately in the special circumstances set out in the Code. In particular the Government indicated that it proposed to amend clause 29 of the Code to require a franchisor to provide a franchisee with seven days’ notice of any proposed termination in special circumstances, so that a mediator or arbitrator can assist the parties to negotiate.
The Government however indicated that it considered it appropriate that franchisors be able to move quickly to address concerns around fraud or public health and safety.
As set out in our previous article, the Government proposes to amend the Information Statement to warn franchisees of the need to obtain advice about restraints of trade before entering into a franchise agreement. In addition to providing information to franchisees about restraint of trade clauses, the Government proposed to amend the Code to:
As announced as one of its key actions, the Government proposed to encourage greater compliance with the Code by doubling pecuniary penalties for a breach. In particular the Government stated that it would:
The Government in its response to the Fairness in Franchising Report also indicated that it would:
On 7 May 2024, the Minister for Small Business, the Hon Julie Collins MP, released the Australian Government's response to the Independent Review of...
On 23 August 2023, the Government released the Consultation Paper for the 2023 review of the Franchising Code of Conduct.
On 8 February 2024, the Minister for Small Business, the Hon Julie Collins MP, released the Independent Review of the Franchising Code of Conduct by...