Do Your Franchise Agreements Comply with Australian Consumer Law?

In light of recent warnings from the ACCC, it is imperative for franchisors and franchisees to scrutinise their standard form franchise agreements. The ACCC's latest report underscores a crucial call to action following targeted compliance checks within the franchising sector. The findings reveal a prevalent issue: every franchise agreement reviewed harboured potentially unfair contract terms, posing a stark violation of the Australian Consumer Law (ACL), especially in the aftermath of amendments introducing penalties in excess of $50M for unfair contract terms from November 2023.

Franchisors are hereby placed on notice. The ACCC's Deputy Chair, Mick Keogh, expressed significant concerns over the franchisors' lack of compliance with the unfair contract terms provisions of the ACL. This negligence not only risks legal action by the ACCC but also jeopardises the franchising relationship, traditionally marred by power imbalances tilted against franchisees.

The ACCC's scrutiny revealed terms likely exceeding what is reasonably necessary to protect franchisors' legitimate business interests. Such disparities necessitate an urgent review and amendment of franchise agreements to eliminate or rectify any potentially unfair terms, thereby averting possible penalties.

The ACCC encourages a proactive stance: leveraging the report to inform contract term reviews and seeking independent legal advice to ensure compliance. It is paramount for franchisors to not only amend questionable terms but also refrain from enforcing any existing unfair terms.

What can Franchisors and Franchisees do?

Our firm, specialising in franchise law, stands ready to assist both franchisors and franchisees in navigating these complexities. We offer comprehensive reviews of franchise agreements to ensure they align with the current legal standards, particularly considering the ACCC's findings and warnings.

Our expertise enables us to identify, address, and rectify any potentially unfair contract terms, ensuring that your agreements not only comply with the ACL but also safeguard your business interests in a balanced and fair manner.

In an evolving legal landscape, remaining compliant and vigilant is not optional but a necessity. Contact us today to ensure your franchise agreements meet the rigorous standards set forth by the Australian Consumer Law and protect your business from potential legal challenges and penalties.

Don't wait until it's too late, ensure your franchise agreements are fair, compliant, and poised for success in a competitive market.

Need Advice About Franchise Agreements?

Franchisors operate in a highly regulated environment, and franchise agreements that do not comply with the Australian Consumer Law can expose businesses to significant legal, financial and reputational risks. Ensuring your agreements are transparent, enforceable and aligned with current legal requirements is an important part of protecting your franchise network.

Whether you're establishing a new franchise system, reviewing existing franchise documentation or assessing compliance obligations, obtaining tailored legal advice can help reduce risk and provide greater certainty.

Rachelle Eytan advises businesses on commercial agreements, regulatory compliance, business structures and a broad range of commercial law matters, including franchise-related issues.

Visit Rachelle Eytan's profile to learn more about her experience and how she can assist your business.

^{This article was originally prepared by Vincent Caruso, lawyer, during their time at Hicks Oakley Chessell Williams}