Major Overhaul of Franchising Code: What the 2024 Regulations Mean for You

The new Competition and Consumer (Industry Codes—Franchising) Regulations 2024 (the "Regulations") introduce significant updates to Australia's Franchising Code of Conduct (the "Code"). These changes, effective April 1, 2025, aim to address power imbalances, improve industry standards increase penalties, and enhance transparency and dispute resolution. Key highlights include:

Purpose and Scope

• The Regulations replace the 2014 Franchising Code of Conduct, which expires in 2025, and implement recommendations from the 2023 Schaper Review.
• Core objectives include promoting fair conduct between franchisors and franchisees, improving decision-making transparency, and ensuring equitable dispute resolution.

Key Reforms

• Disclosure Enhancements:
• Franchisors must provide updated, clear disclosure documents annually or upon request
• Additional requirements for disclosures on franchisor's solvency, capital expenditure expectations, and use of specific-purpose funds (e.g. marketing funds)
• Removal of the "key facts sheet" for streamlined documentation

• Dispute Resolution and Good Faith Obligations:
• Reinforced requirements for franchisors and franchisees to act in good faith throughout the franchise relationship
• The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) empowered to oversee Alternative Dispute Resolution (ADR) processes and publicise non-compliant franchisors

• Civil Penalties and Enforcement:
• Introduction of a tiered penalty system for breaches, with higher penalties for serious misconduct (e.g. $10 million for corporations or 10% of turnover)
• Standardised penalties for non-compliance with obligations like disclosure and record-keeping (up to 600 penalty units)

• Specific Protections for Franchisees:
• Restrictions on restraint-of-trade clauses and requirements for compensation in cases of non-renewal or early termination
• Prohibitions on requiring franchisees to pay for franchisor legal costs unless pre-agreed as a fixed sum for genuine and reasonable expenses
• Mandatory transparency on funds collected for collective purposes, ensuring franchisees understand the allocation of resources

• Record-Keeping and Compliance:
• Franchisors must maintain critical documentation for six years, ensuring accessibility for audits and dispute resolutions.
• Updates to jurisdiction clauses to align disputes with the location of the franchisee’s operations.

Implementation and Review

• The Regulations will undergo a review before 2030 to assess their effectiveness and ensure alignment with the evolving needs of the franchising sector
• Simplification efforts aim to reduce regulatory burdens while maintaining robust protections for franchise participants

These updates reflect a commitment to fostering fair competition, transparency, and accountability in franchising. Franchise businesses should review these changes closely to ensure compliance and leverage the improved framework for mutual benefit.

Need expert advice on navigating the new franchising regulations? Contact our Commercial Law team today for tailored guidance and support to ensure your business stays compliant and thrives under the updated framework.

Disclaimer: The content provided in this publication is intended for general informational purposes only and should not be construed as tailored advice to address specific individual or organisational circumstances. While we strive to offer accurate and up-to-date information, we cannot guarantee its accuracy at the time of receipt or its continued accuracy in the future. Readers are encouraged to seek professional advice or consult relevant authorities regarding their unique situations.