Changes to the Franchising Code of Conduct
On 1 June 2021, the Commonwealth Government released the final draft of its legislation (Amending Regulations) that will enact changes to the Franchising Code of Conduct (Code).
Whilst not yet law, the Amending Regulations are the culmination of what has been a long period of uncertainty for the sector following the 2018 Joint Committee inquiry, that led to the Fairness in Franchising Report.
The Fairness in Franchising Report found that the current Code, in the opinion of the Joint Committee, failed to deter what it considered to be systemic poor conduct by franchisors. You can read our summary of the report here.
With this in mind, as expected, the changes to the Code almost all favour franchisees and attempt to redress their power imbalance with franchisors (whether perceived or actual).
The Amending Regulations follow the release of draft regulations on 20 November 2020, which we summarised in our earlier article.
Are the Amending Regulations the same as the 2020 draft regulations?
No. There have been changes made. For example, the controversial issue regarding a franchisor’s obligation to disclose rebate arrangements has been clarified, and the suite of specific provisions foreshadowed in relation to motor vehicle dealerships has been included.
We will provide a further article summarising key changes shortly.
When will the Amending Regulations commence?
There are a variety of commencement dates for various provisions.
Most changes relating to dispute resolution and complaints handling will apply to disputes notified on or after 2 June 2021 (irrespective of when the relevant franchise agreement was executed).
Amendments to the Code which require franchisors to change disclosure documents will apply on or after 1 November 2021, meaning that franchisors with a June/July financial year can incorporate the changes when they do their ordinary annual update.
The remainder of the changes will apply to franchise agreements entered into (and sometimes renewed or extended) on or after 1 July 2021. This includes the new disclosure requirements and obligation to provide a ‘key fact sheet’ (noting that the form of the fact sheet is not available as at the date of this article).
What do you need to do now?
The first priority for franchisors will be:
- Understanding the revised disclosure and cooling off provisions.
- Updating franchise agreements to reflect the updated Code.
- Preparing the key facts sheet.
- Updating disclosure documents.
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