If you are involved in franchising, you need to be aware of the new obligations and protections that are set to apply to franchise agreements entered, extended, renewed or transferred from 1 April 2025.

In this article, we briefly explore the nature, application and effect of the Australian Government’s new Franchising Code of Conduct (the Code) for franchising participants.

Purpose of the Changes

Changes made to the Code are designed to reflect an expanded purpose, outlined in section 15, concerned with regulating the conduct of participants in franchising in a way that:

• addresses the imbalance of power between franchisors and franchisees;
• improves standards of franchising conduct and practice; and
• provides a fair and equitable dispute resolution procedure for participants.

The Code also confers functions on the Australian Small Business and Family Enterprise Ombudsman in relation to the Code and confers functions on the Secretary for the administration of the Franchise Disclosure Register.

Franchisor Action: when compliance with changes is required

Some of the new rules will become mandatory on 1 April 2025, while others are subject to a grace period, allowing compliance to be phased in by 1 November 2025.

From 1 April 2025:

Restraint of trade clauses cannot be utilized by a franchisor in the circumstances listed in section 42, now including circumstances where a franchisee has sought to renew or extend an agreement. Relevantly, the new code prohibits a franchisor entering into an agreement that contains such a restraint clause, instead of merely rendering that clause of the agreement unenforceable.

Section 34 is another expanded section. It requires the franchisor to provide a franchisee with materially relevant facts that are not included in the Disclosure Document.

Additional civil penalties apply to non-compliance with the requirements under the code, including conduct by franchisors who include prohibited terms in franchise agreements, and who do not meet their disclosure obligations. The maximum civil penalty is now set at 600 units.

From 1 November 2025:

Compliance with the new disclosure obligations requires the franchisor to include in the Disclosure Document, amongst existing obligations:

1. a statement on whether the franchisee is required to undertake significant capital expenditure during the term of the franchise agreement. Where required, information on rationale, amount, timing and nature of expenditure, anticipated outcomes and benefits, and expected risks will also need to be included in the Disclosure Document;[1] and
2. specific information required in relation to specific purpose funds, which cover funds known as marketing or cooperative funds under the old Code. [2]

New franchise agreements requirements must include the provision of:

• compensation for early termination in certain circumstances, including where the franchisor:
  • withdraws from the Australian market
  • rationalises its networks in Australia
  • changes its distribution model in Australia;[3] and
• reasonable opportunity for return on investment.[4]

The new Code provides that existing franchise agreements and the conduct of the parties to that existing agreement are subject to the old Code until those agreements are renewed, extended or transferred (trigger events).

Franchisors should seek professional advice on their obligations, having regard to their individual circumstances, including the financial year under which they are operating.

Franchisee Rights: changes affecting franchisees

Franchisees seeking to enter into an additional or new franchise agreement with their franchisor are now able to:

1. opt out of receiving Disclosure Documents; and
2. opt out of the mandatory 14-day cooling off period after signing a franchise agreement,

provided that the previous franchise agreement with the franchisor was the same or substantially similar to the existing agreement.[5]

Need help navigating the changes or managing a current dispute?

If you are a franchise participant, you should be aware of the increased risks and protections arising as a result of the changes affected by the New Code. For assistance in responding strategically to the changing legal landscape, contact one of our expert lawyers at Rose Litigation Lawyers.

[1] Competition and Consumer (Industry Codes—Franchising) Regulations 2024, sch1 cl14.

[2] Ibid, ss 31, 61 and sch1 cl 15.

[3] Ibid s 43(2).

[4] Ibid s 44.

[5] Ibid ss 23(4), 24(4), 50(7); 52(4).

The content of this publication is intended to provide a summary and commentary only. It is not intended to be comprehensive nor does it constitute legal advice, and has been prepared based on applicable legislation and case authority at the date of publication. You should seek legal advice on specific circumstances before taking any action.