Franchising in Australia: Key Code of Conduct Rules Explained
Franchising is a popular way for businesses to expand their operations and brand presence across Australia. For potential franchisors and franchisees, the model offers mutual benefits—brand recognition, shared resources, and established systems. However, franchising in Australia operates within a strict legal framework.
The Franchising Code of Conduct (the Code), governed under the Competition and Consumer Act 2010 and regulated by the Australian Competition and Consumer Commission (ACCC), imposes legally binding obligations on all parties. For anyone involved in franchising, understanding these requirements is not just good practice—it’s essential to avoid legal and financial risks.
As specialists in Commercial and Corporate Law, we break down the Code’s key provisions and explain what both franchisors and franchisees need to know to remain compliant.
What is the Franchising Code of Conduct?
The Franchising Code of Conduct is a mandatory industry code that sets out rights, responsibilities, and obligations for franchisors and franchisees. It is designed to promote transparency, fairness, and accountability in franchise relationships.
Failure to comply with the Code can lead to significant penalties, enforceable undertakings, and reputational damage.
Pre-contract Disclosure Obligations
One of the Code’s core requirements is full and accurate disclosure before a franchise agreement is signed.
Franchisors must provide:
Disclosure Document (updated annually) with financial details, litigation history, fees, and obligations.
Key Facts Sheet summarising critical information in plain language.
A copy of the Franchising Code of Conduct itself.
The proposed franchise agreement for review.
These must be provided at least 14 days before signing to give prospective franchisees time to seek independent legal and financial advice.
Cooling-off Period
The Code provides a 14-day cooling-off period for new franchisees. This means a franchisee can terminate the agreement within that period after signing (or after making a payment) and receive a refund of most costs.
This safeguard helps ensure that franchisees are not locked into an arrangement without adequate reflection time.
Good Faith Requirement
The Code imposes a legal obligation on all parties to act in good faith. This includes being honest, cooperative, and not acting in a way that undermines the other party’s right to benefit from the agreement.
Good faith applies throughout the franchise relationship—from initial negotiations to dispute resolution and renewal or termination.
Marketing Funds
If a franchisor operates a marketing or advertising fund, the Code requires:
Clear written disclosure of how contributions are spent.
Annual financial statements for the fund.
An audit of the fund if requested by franchisees.
Transparency in marketing fund management prevents misuse and promotes trust.
End of Term and Renewal Rights
The Code outlines obligations when a franchise agreement approaches its end date, including:
Timely notification of whether the agreement will be renewed.
Return of property and confidential information.
Clear terms for transfer or sale of the business.
Failure to follow these processes can lead to disputes and possible legal action.
Dispute Resolution
Disputes are to be handled under the Code’s dispute resolution procedures, which prioritise mediation.
If parties cannot agree, the ACCC or the Australian Small Business and Family Enterprise Ombudsman can help appoint a mediator. Early, cooperative dispute resolution helps preserve relationships and minimise legal costs.
Penalties for Non-Compliance
The ACCC actively enforces the Code. Penalties for breaches can include:
Infringement notices with fines of up to hundreds of thousands of dollars.
Public naming and shaming of non-compliant franchisors.
Recent Reforms
Recent updates to the Code have strengthened franchisee protections, including:
Increased penalties for breaches.
Clearer disclosure of significant capital expenditure requirements.
New rules for termination rights and dispute resolution.
Franchisors should review agreements regularly to ensure they reflect the latest Code requirements.
Why Legal Advice is Essential
Navigating the Franchising Code of Conduct can be complex, and mistakes can be costly. As experts in Commercial and Corporate Law, we recommend:
For franchisors - review all franchise agreements and disclosure documents annually, and ensure staff understand compliance obligations.
For franchisees - seek independent legal and financial advice before signing anything, and understand your rights to avoid future disputes.
Franchising can be a profitable growth model, but only if it is built on a foundation of legal compliance and mutual trust.
Franchising can be a powerful growth strategy—but only if you comply with the law. Our Commercial and Corporate Law specialists can guide you through every step, from drafting watertight agreements to ensuring compliance with the Code of Conduct.
Don’t risk costly disputes or penalties—
Contact New South Lawyers today to protect your business and set your franchise up for long-term success.
