The Franchising Code of Conduct, being a regulation under the Competition and Consumer Act, regulates the offer and sale of franchises as well as the rights and obligations under a franchise agreement in Australia. he Australian Competition and Consumer Commission (ACCC) is the government agency that administers and enforces the Competition and Consumer Act and the Franchising Code of Conduct.

 

The Code requires the franchisor to provide a disclosure document and related material (including a franchise agreement in essentially final form with all details completed including names of people, fees, dates etc) 14 days before the franchisor can sign the franchise agreement or accept any non-refundable money or other consideration from the franchisee.  The disclosure document must include details of the franchisor and its directors and associates, including their business experience, details of litigation involving the franchisor or its directors, the franchisor’s financial information, a summary of the various payments and costs associated with buying, establishing and operating the franchise and a summary of the obligations of the franchisor and franchisee under the relevant franchise agreement. 

 

The disclosure document must be in the prescribed form not only as to the information to be disclosed but also as to the layout of the document. A copy of the franchise agreement (in the form in which it is to be executed) must also be included with the disclosure document.

 

The disclosure document must be updated each year within four months of the end of the franchisor’s financial year.

 

During any given year, updates to the disclosure document are generally not required but if certain ‘materially relevant facts’ arise, disclosure of them must be given to all franchisees within 14 days.

The franchisee must provide a certificate that the franchisee has obtained legal or business advice (or chosen not to do so after the franchisor has recommended it), and then has a 7 day cooling off period from signing the agreement during which time the franchisee can essentially change its mind.  It can often take a month between providing disclosure and signing.  This time period is of course relevant to issues such as training and opening of any stores.

 

In the event the franchisor breaches the disclosure requirements, if the violation has caused loss to the affected franchisee, a

 

franchisee may:  • report alleged breaches to the ACCC in the hope that the ACCC will take up the matter with the franchisor; or

 

litigate (usually seeking remedies such as a declaration that the franchisor has failed to comply with the Franchising Code of

 

Conduct, orders declaring the franchise agreement void, rescission orders, orders for the refund of money or damages).