Changes to the Franchising Code of Conduct now in effect

The Australian Competition and Consumer Commission (ACCC) has announced that changes to the mandatory Franchising Code of Conduct came into effect on 1 January 2015. The ACCC has new powers to:
  • issue infringement notices of $8,500 for body corporates ($1,700 for individuals and other entities), and
  • seek penalties of up to $51,000 in court for serious breaches of certain Code provisions.
"The ACCC welcomes these changes to the Franchising Code as valuable additions to our arsenal. Rogue operators should be on notice that the ACCC can now seek significant penalties for serious breaches of the Code," ACCC Acting Chair Dr Michael Schaper said.

The changes introduce a good faith obligation into the Code. This obligation requires both parties to a franchise agreement to remain loyal to the contract that they have signed.

Acting dishonestly, for an ulterior motive or in a way that undermines or denies the other party the benefits of the contract would breach the good faith obligation.

"Franchisees and franchisors will still be able to negotiate and make agreements in their own interest but this new obligation requires all parties to be honest and upfront in their dealings," Dr Schaper said.

The code will also now require increased disclosure prior to entering a franchise agreement, greater transparency around the use of marketing funds and clarity around whether the franchisor or franchisee can operate online.

The new Code applies to all franchise systems and franchisees across Australia.

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