Understanding the Australian Franchising Code of Conduct

Gavin Bottrell

Chartered Accountant, Financial Planner & Tax Advisor | Driving Business Success in Newcastle & Maitland |

Published Nov 30, 2023

The Australian Franchising Code of Conduct is a mandatory industry code that regulates the relationship between franchisors and franchisees in Australia. This code aims to ensure that both parties understand their rights and responsibilities and operate within a fair and transparent framework. Newcastle accountants emphasize the importance of familiarizing yourself with the code, whether you are a franchisor or a franchisee, to ensure compliance and minimize potential disputes. This article will provide an overview of the key aspects of the Australian Franchising Code of Conduct and how it impacts the franchising landscape in Australia.

Good Faith Obligations

The Australian Franchising Code of Conduct requires both franchisors and franchisees to act in good faith in their dealings with each other. This means that they must act honestly, fairly, and reasonably, considering the interests of the other party. Newcastle accountants note that the good faith obligations extend to all aspects of the franchising relationship, including negotiations, dispute resolution, and ongoing communication.

Disclosure Requirements

Franchisors are required to provide prospective franchisees with a disclosure document, which contains essential information about the franchise system, the franchisor’s financial position, and the franchise agreement’s key terms. The disclosure document must be updated annually and provided to the franchisee at least 14 days before entering into a franchise agreement or renewing an existing agreement. Newcastle accountants recommend that both parties seek professional advice when reviewing the disclosure document to ensure they fully understand the implications of the information provided.

Cooling-off Period

The code also provides franchisees with a cooling-off period, allowing them to change their minds after signing a franchise agreement. The cooling-off period lasts for seven days, during which the franchisee can terminate the agreement without penalty. Newcastle accountants highlight the importance of being aware of this provision, as it offers a safety net for new franchisees who may experience second thoughts or concerns about their investment.

Marketing and Advertising

The Australian Franchising Code of Conduct contains specific provisions relating to marketing and advertising funds. Franchisors are required to maintain a separate marketing fund for contributions made by franchisees and use these funds solely for marketing and advertising purposes that benefit the entire franchise system. Newcastle accountants can assist franchisors in ensuring compliance with these requirements and help them develop transparent and effective marketing strategies.

Dispute Resolution

Franchising code seeks to provide a framework for resolving conflicts between franchisors and franchisees. The code requires both parties to attempt to resolve disputes through internal mediation before escalating the matter to external dispute resolution mechanisms. It also prescribes a specific process for notifying the other party of the dispute, including timeframes and the information required. Newcastle accountants recommend that franchisors and franchisees familiarize themselves with the dispute resolution process to ensure they are prepared to navigate any potential conflicts effectively.

Termination and Exit Rights

The code also regulates the termination of franchise agreements, setting out specific grounds for termination and the process that must be followed. Both franchisors and franchisees must adhere to these provisions when ending a franchise agreement to ensure a fair and transparent exit process. Newcastle accountants suggest that both parties carefully review the termination provisions in their franchise agreement and seek legal advice if necessary to ensure they understand their rights and obligations.

Conclusion

Understanding the Australian Franchising Code of Conduct is essential for both franchisors and franchisees, as it provides a framework for their relationship and ensures that they operate within a fair and transparent environment. By familiarizing yourself with the code’s key aspects and seeking guidance from Newcastle accountants, you can ensure compliance with the code, minimize potential disputes, and foster a positive franchising relationship. The code covers essential areas such as good faith obligations, disclosure requirements, cooling-off periods, marketing and advertising, dispute resolution, and termination and exit rights, all of which contribute to a more stable and successful franchising landscape in Australia.

Ensure your franchising success and compliance with the Australian Franchising Code of Conduct by partnering with Bottrell Accounting. Our team of experienced Newcastle accountants is here to guide you through the complexities of the code and provide expert advice, ensuring your franchising relationship is built on a strong foundation of transparency and fairness. Reach out to Bottrell Accounting today to secure a solid understanding of the Australian Franchising Code of Conduct. Let Bottrell Accounting be your trusted partner, helping you navigate the Australian franchising landscape with confidence and ease.