Australia’s new mandatory Franchising Code of Conduct comes into effect
The new Australian Franchising Code of Conduct has come into effect, as of 1 January 2015.
From 1 January 2015, the previous Franchising Code was repealed and replaced with a new Code which will applies to all franchise systems operating in Australia.
Some of the key changes the new Code brings include:
- introducing an obligation for franchisors and franchisees (including prospective franchisees) to act in good faith towards one another,
- Infringement notices of
- $8,500 for a company, and
- $1,700 for individuals and other entities,
- court ordered pecuniary penalties of up to $51,000 for breaches of the penalty provisions of the Code,
- requiring franchisors to provide prospective franchisees with a short information sheet which clearly outlines some of the risks and rewards of franchising,
- requiring greater transparency around the use of marketing funds, including requiring the franchisor to keep the marketing and advertising fees in a separate account, and to provide meaningful information to franchisees about the fund’s income and expenditure, and
- requiring additional disclosure regarding the ability of the franchisor and a franchisee to sell goods and services online.
The Australian Competition and Consumer Commission (ACCC) said its enforcement priorities under the new Code will include failure to act in good faith, failure to provide a disclosure document, refusal to attend mediation, and the unlawful termination of a franchise agreement.
“There will not be a moratorium period on enforcement action; however, the ACCC will be focusing on particularly egregious conduct,” said Dr Michael Schaper, ACCC Deputy Chair. “As always, the ACCC will take a common sense approach to enforcing the Code,” he said.
The ACCC has developed guidance on the new Code, including an updated Franchisee Manual and Franchisor Compliance Manual, which was be launched on 9 December 2014. The new guidance will be available at www.accc.gov.au/franchisingcode.
The ACCC also provides a resource for prospective franchisees through Griffith University’s Asia-Pacific Centre for Franchising Excellence. The Pre-Entry Franchise Education Program is a free, online program consisting of five modules and is designed to give small business operators and prospective franchisees a realistic understanding of franchising.
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