2021 Franchising Code Amendments

It has been a couple of years in the making and the Franchising Code amendments are coming into effect fast from 1 July 2021.

The Code updates:

• introduce conciliation and voluntary arbitration which is totally new for franchising

• require franchisors to participate in a multi-franchisee dispute resolution process (previously a franchisor could insist on dealing with each franchisee individually)

• introduce a new mandatory key facts sheet to be provided as part of pre-agreement disclosure

• increase the scope of disclosure in relation to goodwill

• introduce a new 4 page information statement to replace the current one page document

• add significant disclosure requirements relating to rebates, including the new obligation to disclose the total amount of rebates or other financial benefits received in the previous financial year from each supplier, expressed as a single aggregate percentage of total group purchases from that supplier

• provides franchisees with an explicit avenue to request early termination of a franchise agreement

• extend the cooling off period to 14 days

• prohibit undisclosed significant capital expenditure

• increase marketing fund reporting obligations

• prevent a franchisor from contractually passing on future legal costs associated with the agreement where those costs are indeterminate at the time the agreement is signed

• prohibit franchisors from unilaterally varying an agreement with retrospective effect unless the written consent of the franchisee is obtained

• increase disclosure obligations in relation to leases

• provide that only a serious breach of an agreement by a franchisee is relevant to the enforceability of a restraint of trade provision.