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Amendments to the Australian Franchising Code of Conduct

05 November 2007

Australia's federal parliament has agreed to amend the Franchising Code of Conduct (the "Code") which regulates franchising within Australia.  The amendments will take effect from the 1st March 2008.

Probably the most significant change for foreign franchisors is that there will no longer be an exemption from the Code for those granting only a single franchise or master franchise in Australia.  This means that from March 1 2008 all foreign franchisors will have to comply with the amended Code requirements, such as the requirement to provide their franchisees with an annual disclosure document within 4 months of the end of each financial year.

Most of the other amendments to the Code require franchisors to provide additional information or documentation to their franchisees.  Some of the most significant examples are:

  • franchisors must provide their franchisees with a copy of their franchise agreement in the form it is intended to be signed (not just in their template form prior to amending it) 14 days prior to execution;
  • at the same time franchisors must also provide their franchisees with all other documents relating to their franchise agreement such as any related leases, confidentiality agreements, guarantee documents or other documentation;
  • franchisors must provide their franchisees with ongoing disclosure of materially relevant information throughout the franchise term within 14 days of any relevant decisions or events (this was previously 60 days); and
  • franchisors with marketing funds paid for by their franchisees must now provide annual audited accounts of such marketing funds to those franchisees unless 75% of those franchisees agree not to receive such accounts.

In addition, the amendments to the Code require the disclosure documents that franchisors provide to their franchisees to include new information such as the contact details of all franchisees that have left the franchise network for any reason in the last 3 years.

These amendments to the Code will mean current franchisors granting rights in Australia will need to update their documentation prior to the 1 March 2008 deadline.  If you wish to discuss any amendments to your current documentation or discuss franchising in Australia in general then please contact Mark Abell or Babette Märzheuser-Wood.