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First steps in the right direction: Government responds to the Fairness in Franchising Report

Catherine Sedgley

Assisted by Jason Vo

If you are a franchisor or franchisee, you will want to pay attention and be abreast of the key changes the Government is proposing to make to the Franchising Code of Conduct.

Further to our earlier article which provided an overview of the recommendations made by the 2019 Parliamentary Joint Committee on the Corporations and Financial Services inquiry into the operation and effectiveness of the Franchising Code of Conduct report: Fairness in Franchising[1] (“the Report”), after much anticipation, the Federal Government has taken the first steps to improving transparency and business relationships in the franchising sector by announcing a series of proposed changes to the Franchising Code of Conduct. (“the Code”)

The changes proposed by the Government aim to correct the entrenched imbalance of power between franchisees and franchisors and aim to strengthen the regulatory framework within four facets of the franchising experience, which include:

  1. Entering a franchise agreement
  2. Operating a franchise
  3. Exiting and end of term agreements
  4. Code compliance

The Government’s key actions include:

What’s next? Implications for franchisors and franchisees

Although the response by the Government does not provide any timelines for the implementation of the proposed reforms to the Code, the proposed reforms are substantial and are likely to have additional compliance cost for franchise systems and significant impacts on both franchisors and franchisees.

In the meantime, franchisors should remain proactive and continuously review their business model and agreements, with a focus on being reasonable and fair. On the other hand, franchisees should protect their own interests by undertaking a thorough due diligence process prior to buying a franchise.

Coleman Greig will monitor the implementation of the proposed reforms and provide updates as they arise, so please stay tuned.

If you have a query relating to any of the information in this article, or you would like to speak with an experienced franchising lawyer regarding your own franchising matter, please don't hesitate to get in touch with a member of Coleman Greig's Franchising team, who would be more than happy to assist you.

Disclaimer: This information is for information purposes only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. Please contact us if you wish for us to advise you on any issue you may have in your circumstances.

 

[1] https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial_Services/Franchising/Report