In April 2014, the Federal Government released a draft version of the proposed new Franchising Code of Conduct [the Code]. These proposed amendments will take effect in January 2015, and based on the draft, are likely to include:
- The introduction of a general duty on both franchisors and franchisees to act in good faith during their dealings with each other;
- Transparency to disclose information regarding the use of marketing funds, additional record keeping requirements and a prohibition on franchisors seeking to impose significant capital expenditure during the term;
- An obligation on franchisors to provide prospective franchisees with a “risk statement” prior to giving disclosure, which details the risks and rewards of franchising;
- Restrictions on franchisors enforcing restraints of trade in certain defined circumstances;
- A re-numbering of the Code, new definitions and the removal of the short form Annexure 2 Disclosure Document. In addition, the removal of the “double disclosure” currently imposed on master franchisees and overseas franchisors. This will mean only one Disclosure Document will be provided to a prospective franchisee detailing master franchise arrangements;
- A greater limitation on the circumstances a franchisor may immediately terminate a franchise agreement;
- A requirement that disputes are to be argued in the State the franchise is operated in and a prohibition against franchisors seeking to recover their dispute resolution costs from franchisees;
- Amending the Competition and Consumer Act 2010 to provide for civil penalties and infringements notices to breaches of the Code:
- seeking civil pecuniary penalties of up to $51,000 from the court; and
- issuing infringement notices of up to $8,500 for companies and $1,700 for individuals
The amended Code will apply to franchise agreements or renewals which occur after 1 January 2015.
For further advice on the franchising code of conduct, please contact Mirella Angelino, Senior Associate here or call Pace Lawyers on (08) 8410 9294.
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