Amendments to the Australian Franchising Code of Conduct
05 November 2007
Australia's federal parliament has agreed to amend the
Franchising Code of Conduct (the "Code") which regulates
franchising within Australia. The amendments will take effect
from the 1st March 2008.
Probably the most significant change for
foreign franchisors is that there will no longer be an exemption
from the Code for those granting only a single franchise or master
franchise in Australia. This means that from March 1 2008 all
foreign franchisors will have to comply with the amended Code
requirements, such as the requirement to provide
their franchisees with an annual disclosure document within 4
months of the end of each financial year.
Most of the other amendments to the Code
require franchisors to provide additional information or
documentation to their franchisees. Some of the most
significant examples are:
- franchisors must provide their franchisees with a copy of
their franchise agreement in the form it is intended to be signed
(not just in their template form prior to amending it) 14 days
prior to execution;
- at the same time franchisors must also provide
their franchisees with all other documents relating to their
franchise agreement such as any related leases, confidentiality
agreements, guarantee documents or other documentation;
- franchisors must provide their franchisees with
ongoing disclosure of materially relevant information throughout
the franchise term within 14 days of any relevant decisions or
events (this was previously 60 days); and
- franchisors with marketing funds paid for by
their franchisees must now provide annual audited accounts of
such marketing funds to those franchisees unless 75% of those
franchisees agree not to receive such accounts.
In addition, the amendments to the Code
require the disclosure documents that franchisors provide to their
franchisees to include new information such as the contact details
of all franchisees that have left the franchise network for any
reason in the last 3 years.
These amendments to the Code will mean
current franchisors granting rights in Australia will need to
update their documentation prior to the 1 March 2008
deadline. If you wish to discuss any amendments to your
current documentation or discuss franchising in Australia in
general then please contact Mark Abell or Babette
Märzheuser-Wood.