In Australia, franchising is a highly regulated industry, which is subject to a mandatory code of conduct known as the Franchising Code of Conduct.

Current Code and New Code

The existing code, the Competition and Consumer (Industry Codes–Franchising) Regulations 2014 (Current Code), will continue to apply to franchise agreements (FAs) entered into before 1 April 2025, until such FAs are transferred, renewed, or extended after 1 April 2025. At that point, they will be captured and therefore governed by the Competition and Consumer (Industry Code–Franchising) Regulations 2024 (Cth) (New Code).

Timing of key changes

The New Code introduces new concepts and updates certain existing provisions commencing on 1 April 2025, with some further provisions starting on 1 November 2025.

We have prepared the below table which encloses a non-exhaustive list of some critical provisions under the New Code, with a comparison to the Current Code.

 

Current Code New Code
New terminology and formatting

Adopts clauses

 
  • Adopts sections
  • Current numbering has changed in the clauses and also in the disclosure document
  • New definition of specific purpose fund to encompass marketing, cooperative, and other funds for specific purposes, such as conference and IT funds (s6)
Requires franchisors to create, maintain or provide a Key Facts Sheet for prospective franchisees
  • No longer requires a Key Fact Sheet (KFS)
  • Franchisors are no longer able to upload a Key Facts Sheet (or their Disclosure Document – DD) to the Franchise Disclosure Register (FDR) – Note: Franchisors do not need to remove their KFS or DDs from the FDR as they will not be accessible to the public from 1 April 2025
  • Franchisors are expected to upload to the FDR additional details, including if their FA provides for arbitration of disputes.
Civil penalty provisions
Only certain substantive obligations are subject to a civil penalty provision, with a 600 penalty units maximum penalty per contravention.

Under the New Code, all substantive obligations are subject to a civil penalty provision, with a 600 penalty units maximum penalty for contravention. For completeness, s17 of the New Code also includes penalties that can be more than $10m, as is the case in the Current Code.

600 penalty units w=equals $198,000 given each penalty unit equals $330.
Purpose of Code (section 15)

Clause 2 simply states that the purpose of the Current Code is to regulate the conduct of participants in franchising

towards other participants in franchising.

 Section 15 of the New Code expands the purpose provision, identifying the following specific objectives:

  • regulating the conduct of participants in franchising towards other participants in franchising (same wording as clause 2 in Current Code), particularly to address the imbalance of power between franchisors and franchisees and prospective franchisees
  • improving standards of conduct in the industry; and
  • providing fair and equitable dispute resolution procedures.
Opt-out of cooling off rights
Nil

This is a new concept.

Under ss 23(4), 24(4), 50(7) and 52(4), franchisees may now opt-out of the 14-day cooling off period if they have or recently had another FA with the same franchisor that is the same or substantially similar document to their existing agreement, when they seek to enter into another or new franchise agreement with their franchisor.
Compensation for early termination
Under clause 46, franchisees have rights to terminate the agreement and receive compensation for early termination ONLY for new vehicle dealership agreements. For completeness, the Current Code also entitle franchisees to compensation rights under cooling-off rights. New s43 applies even outside the cooling-off periods. Under s43 of the New Code, all franchise agreements (and not just a new vehicle dealership agreement) must provide that the franchisee must be compensated for early termination if the Franchisor:

  • withdraws from the Australian Market;
  • rationalises its networks in Australia; or
  • changes its distribution models in Australia.

This clause will apply on and from 1 November 2025
Return on Investment
Nil

Under s44 of the New Code, FAs must provide franchisees a reasonable opportunity to make a return during the term of the agreement on any investment required by the franchisor as part of entering into or fulfilling the terms of the agreement.

This clause will apply on and from 1 November 2025
Specific purpose funds (ss 31 and 61)
Nil

This is a new concept, which captures marketing and cooperative funds as well as other specific purpose funds, such as conference and IT funds.

This clause will apply on and from 1 November 2025
Disclosure Documents
Clause 8 of the Current Code requires franchisors to create and update an annual DD, which must be signed by the franchisor to ensure its accuracy and authenticity Under s20 of the New Code:

  • DDs must contain more detailed information, including capital expenditures, risks, and operational changes; and
  • electronic signatures are allowed.
Current obligations on marketing or cooperative funds FAs and DDs created before 1 November 2025 do not need to include information on specific purpose funds unless the information relates to marketing or cooperative funds under the Current Code.

How can we help? Questions?

If you have any questions or concerns regarding your obligations as a Franchisor or your rights as a Franchisee under the New Code, please feel free to reach out to the writer and its team. We’d love to help you!

MV Law Canberra

Ph: (02) 6279 4444

Email: info@mvlaw.com.au