New Franchising Code of Conduct Commences
A new code of conduct for the franchising sector commenced on 1 January 2015. The previous code was repealed and replaced with the new Franchising Code of Conduct which will apply to all franchise systems operating in Australia.
It is important all franchisors, franchisees and prospective franchisees understand their rights and responsibilities under the new code.
The new code:
- removes the choice as to which form of disclosure document is required ("short" form or "long" form) with a single format now stipulated;
- introduces an obligation under the Code for parties to act in good faith in their dealings with one another;
- introduces financial penalties and infringement notices for serious breaches of the Code;
- requires franchisors to provide prospective franchisees with a short information sheet outlining the risks and rewards of franchising;
- requires franchisors to provide greater transparency in the use of and accounting for money used for marketing and advertising and to set up a separate marketing fund for marketing and advertising fees;
- requires additional disclosure about the ability of the franchisor and a franchisee to sell online; and
- prohibits franchisors from imposing significant capital expenditure except in limited circumstances.
If you have questions about how the new Code will impact you or you are considering a franchise model please contact us for advice.