The Franchising Code of Conduct helps protect the rights of franchisees operating in Australia. If you’re thinking about buying a franchise, this article will help you understand how the Code works and what you can do if your franchisor breaches it.

Use the table of contents to quickly jump between sections.

What Is the Franchising Code of Conduct?

The Competition and Consumer (Industry Codes—Franchising) Regulation 2014 (Cth), also known as the Franchising Code of Conduct, regulates how franchises operate in Australia. It helps make sure that franchisors don’t take advantage of franchises through deception or unfair business practices.

The Code covers topics such as:

  • What franchisors have to disclose to franchisees
  • What terms can be in franchise agreements
  • How franchises can be transferred and terminated
  • How disputes between franchisors and franchisees can be involved
  • Specific regulations for vehicle dealerships
  • How the franchise disclosure register works

It also contains important information about franchise agreements, franchise disclosure documents, and key facts sheets.

Who Does the Franchising Code of Conduct Apply To?

The Franchising Code of Conduct applies to anyone who engages in franchise activity in Australia. This includes franchisors, franchisees, and sub-franchisors (franchisees who own a master franchise).

There are some exceptions – for example, the Code only covers conduct from on or after 1 July 2015 for agreements entered into on or after 1 October 1998. Conduct that predates the Code’s coverage may fall under the old Trade Practices (Industry Codes—Franchising) Regulations 1998 (Cth) or other legislation. Keep in mind that, if your agreement was formed before 1 July 2015, you may still have obligations that need to be discharged under the old regulations.

You also aren’t covered by the Code if your business is an applicable cooperative or mutual entity. Organisations that are covered by another industry code, like the Unit Pricing Code, are also exempt.      

Who Is the Code’s Regulator?

The Code is regulated by the Australian Competition and Consumer Commission (ACCC). This doesn’t mean the ACCC handles individual franchise disputes – instead, they take action against franchisors that act against the public interest. Offending franchisors are normally reported to the ACCC by disgruntled franchisees or consumers (the agency receives around 400 reports about franchises per year).

If the ACCC does find a franchisor that’s breaking the rules, it may take enforcement action. Possible actions include:

  • The ACCC asks the franchisor to start doing or stop doing certain things (administrative resolution).
  • The franchisor agrees to start doing or stop doing certain things, and can be taken to court if they don’t comply (court-enforced undertaking).
  • The ACCC issues an infringement notice to the franchisor. Infringement notices normally include a court-enforced undertaking and some sort of financial penalty.
  • The ACCC takes the franchisor to court.

For example, in October 2022, Jim’s Group Pty Ltd – the franchisor behind the Jim’s Mowing brand – was forced to pay $24,420 in penalties. The company hadn’t properly disclosed information to a prospective franchisee, which the ACCC classed as making a false or misleading representation.

Where Can I Get Advice About the Code?

If you want general advice about interpreting the Code, you can contact the ACCC. They can help you understand your rights as a franchisee, how franchises work from a legal perspective, and the sorts of information that your franchisor needs to disclose to you.

For advice specific to your situation, talk to an experienced commercial lawyer. You should never sign a franchising agreement without having your solicitor check it first – legal jargon can be complicated, and you don’t want to get locked into a bad franchise (especially one where non-refundable payments are involved). They’ll also be able to help you do things like run background checks on potential franchisors to make sure any disclosed information matches the facts.

Keep in mind that the ACCC and your lawyer are giving legal advice, not business advice. They can help you spot risks associated with a franchise, but they can’t help you assess its commercial potential. A business consultant or coach with hands-on franchise experience can be a good place to get feasibility advice. 

I’m Having a Dispute – What Should I Do?

In any business relationship, disputes can happen, and franchises are no different. Most of the time, any issues can be resolved by both parties working together to find a solution. Every franchise agreement has dispute resolution processes in place, so check your agreement if you’re wondering how to approach the situation.

If you’ve tried talking to your franchisor with your lawyer’s assistance and you still can’t find common ground, Australia does have state and national support for franchisees. Start with the Australian Small Business and Family Enterprise Ombudsman. The ombudsman can give you advice about dispute resolution and finding a mediator. Alternatively, your state’s small business commissioner can help you do the same things, although services may vary from state to state.  

When disputes can’t be resolved internally under your franchise agreement, mediation through specialist franchise mediators is normally the next step. Although going to court is always a final option, it’s much cheaper, faster and less stressful to settle your dispute with a mediator’s help.

Next Steps

Becoming a franchisee is an incredibly exciting opportunity. It’s a chance to build your own business with the backing of a successful, market-tested brand – profit without the stress and uncertainty of starting from scratch.

But it’s always important to approach business opportunities with your eyes open. Understanding the rights you have under the Franchising Code of Conduct can help protect you if your franchisor makes mistakes or engages in illegal conduct.

Thinking about becoming a franchisee? Talk to one of our experienced business coaches about how to find a high-performing franchise business. As members of the world’s largest coaching franchise, ActionCOACH, they know exactly what to look for in franchise businesses, and can help you assess the viability of specific opportunities.

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The information contained on this page is general and informative in nature and should not be interpreted as advice of any kind. Do not make any business, legal or financial decisions based on this information. Always seek the advice of an appropriately qualified professional before engaging in any franchise-related activities.

Post by ActionCOACH
April 20, 2023
ActionCOACH is recognised as the creator and most successful practitioner of business and executive coaching methodology that offers owners and managers a new perspective on their businesses and companies.