Australia

Franchise regulation

The Franchising Code of Conduct is a mandatory industry code under the Competition and Consumer Act 2010 (Cth). Franchising in Australia is also regulated by the Australian Consumer Law in respect of misleading or deceptive conduct and unfair contracts regulations, other legislation such as the Fair Work Act 2009 (Cth), common law and equity.

Pre-contractual disclosure requirements

Franchisors must provide an extensive disclosure document in the prescribed form to prospective franchisees at least 14 days before whichever of the following occurs first: (a) the franchisor and prospective franchisee enter into a franchise agreement; or (b) the prospective franchisee makes a non-refundable payment in connection with the proposed agreement. The disclosure document must be updated within 4 months after the end of every financial year, subject to limited exceptions. There are also ongoing disclosure requirements to franchisees.

There are also other mandatory disclosure requirements which franchisors must comply with, e.g. a key facts sheet must be given in the prescribed form to prospective franchisees at least 14 days before whichever of the following occurs first: (a) the franchisor and prospective franchisee enter into a franchise agreement; or (b) the prospective franchisee makes a non-refundable payment in connection with the proposed agreement.

Registration

Franchisors must create a franchise profile and publish key disclosure information about their franchise on the Franchise Disclosure Register. Master franchisors who only have one Australian subfranchisor, and no intention to grant further franchises, are exempt from having a profile on the Register.

Other issues

• Some clauses are prohibited, including general waivers of liability and clauses requiring the franchisee to pay the franchisor’s dispute resolution costs.
• Some clauses are mandatory, such as regarding complaints handling, grounds of termination and dispute resolution.
• Cooling off period – franchisees can terminate agreement within 14 days of signing it. Franchisors must repay all payments made by the franchisee except reasonable expenses.
• Franchisors must take reasonable steps to ensure franchisees comply with employment law.

Difficulty Rating/Comments

We strongly advise franchise agreements are amended to comply with the Code's requirements before being provided to the franchisee, and that franchisors are compliant with all disclosure requirements, as significant penalties apply for breaches of the Franchising Code of Conduct.

Contact Shariqa Mestroni - Shariqa.Mestroni@twobirds.com or Thomas Jones - Thomas.Jones@twobirds.com