Changes to the Franchising Code of Conduct – 1 July 2021

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The latest raft of changes to the Code have been a long time in the making – over 3 years in fact.

Key notes

  1. Any Franchise Agreement signed after 1 July 2021 will need to comply with the new Code provisions.
  2. From 1 July 2021, Franchisors have to provide prospective Franchisees with a new “Key Facts Sheet” which is a subset of information provided in the Disclosure Document. The Key Facts Sheet must be provided to a prospective Franchisee at least 14 days prior to signing a Franchise Agreement or making a non-refundable payment.
  3. This Key Fact Sheet is to be provided in addition to:
    – a copy of the Franchise Agreement in the form in which it is to be executed
    – a copy of the Disclosure Document
    – a copy of the Code
    – if there are leased premises, a copy of the LeaseNote that before providing the above documents the Franchisor is also required to provide a prospective Franchisee with an Information Statement as soon as practicable after the prospective Franchisee formally applies or expresses an interest in acquiring a franchise business.
  4. There are additional disclosure obligations on a Franchisor relating to possible future capital expenditure and rebates.
  5. Franchisees may request documents in printed form, electronic form or both.
  6. The cooling off period has been extended from 7 to 14 days.
  7. There are new rights for Franchisees to negotiate an early termination if the Franchisee wishes to leave the franchise network.
  8. Dispute Resolution provisions now allow conciliation and voluntary binding arbitration in addition to mediation.

The Australian Small Business and Family Enterprise Ombudsman has said that the reforms will “help level the playing field across the franchising sector” and help “address the power imbalances that often exist”.

There is also a new mandatory Franchise Disclosure Registry scheduled for 2022 – stay tuned for further information about this.

If you are entering into a franchise and you need help navigating the legal complexities of the franchise documents, please telephone Christine Matsinger at MMLaw to discuss your needs.

Christine Matsinger

McColm Matsinger Lawyers

The information in this document represents general information and should not be relied on for your specific circumstances. If you require legal advice and assistance on the matters contained or associated in this document you should contact MMLaw. Please contact Christine Matsinger.

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Disclaimer

The content published in this Blog is in the form of academic papers and the opinions expressed herein are generalised. The information provided is for educational purposes, not specific legal advice.

The application of any principles referred to can alter from case to case and accordingly you should seek independent legal advice in respect of your individual circumstances.

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