Towards Licensing Franchisors: The Latest Twist in the Evolving Franchise Code of Conduct.

If there has been a single constant in my 20 years as a franchise lawyer, it is that the Franchising Code of Conduct, the main regulatory vehicle of the franchising industry, has been under constant review and incremental change.

It came as no surprise therefore that another round of consultations in 2023 culminated in yet another report released in February 2024 by the Minister for Small Business the Hon Julie Collins MP. What did come as a surprise (to the author anyway) is the novel idea of establishing a licensing regime requiring franchisors to become licensed as a condition of the right to operate a franchise system and (most importantly to them) to sell franchises.

The report authors acknowledge that such a change would amount to a fundamental shift and a further comprehensive analysis is needed before entertaining it to any great extent. Suffice to say, the significance of the proposal leaves us with considerable doubt that the government will have the appetite for such drastic change.

The report rightly acknowledges that there is significant misunderstanding, especially amongst franchisees, about what the Code is meant to achieve. The current articulation of the purpose of the Code does not adequately explain to readers why the Code exists, what it seeks to achieve, and what it does not cover. This is an extraordinary about face after thousands of experts have been drafting, debating, lobbying and redrafting the Code for two and a half decades.

With all said and done, the report concludes that the Code is nevertheless fit for purpose, which, it most certainly is not. Watch this space.

P.S. You can read the full report here: https://treasury.gov.au/publication/p2024-487230#:~:text=On%208%20February%202024%2C%20the,by%20its%20Terms%20of%20Reference.