The Franchising Code of Conduct (the code) has recently been amended. These amendments will come into effect on 1 March 2008. The amendments increase the
obligations of the Franchisor in relation to aspects such as: (Note: these are incomplete & are summarized, and must not be relied on as
definitive. They are not. The detailed provisions must be studied):
- The franchisor must provide a copy of the franchise agreement in the form it is to be executed.
- The franchisor must give the franchisee a copy (as well as a summary) of the different agreements that the franchisee is required to enter into under the franchise agreement (if applicable).
- The franchisor must disclose any materially relevant facts (such as certain court proceedings) to the franchisee in writing etc.
- A long-form disclosure document must disclose the name of any business (not previously required) that will provide a rebate or financial benefit to the franchisor (or associate of the franchisor) from the franchisor supplying the franchisee with goods or services.
- If the information is available (and franchisees agree), a long-form disclosure document must include the name, location and contact details of the franchisee for each franchise agreement (as well as the number of franchises) transferred, terminated, not renewed, bought back or ceased to operate in the last three years.
- A disclosure document must include details of criminal, trade practices and other litigation against the franchisor or a franchisor director (previously this was only required for the franchisor).
- In a separate document given to the franchisee, the franchisor must disclose whether: a) the proposed territory or site of the franchise was the site of a previous franchise granted by the franchisor, and if so, b) details of the previous franchise, including the circumstances in which the previous franchisee ceased to operate.
- A franchise agreement must not contain or require a franchisee to sign a waiver of any verbal or written representation made by the franchisor (waivers of this kind were previously permitted in a franchise agreement).
- The Franchising Code now applies to overseas franchisors who grant only one franchise or master franchise in Australia (these franchisors were previously exempted from the code).
- A franchisor must not induce a franchisee or prospective franchisee not to form an association or associate with other franchisees or prospective franchisees for a lawful purpose (previously this applied to franchisees but not prospective franchisees).
