On 20 August 2020, the Australian Government released its response to the “Fairness in Franchising Report” (the Report) which was published last year by the Joint Committee on Corporations and Financial Services following its inquiry into the operation and effectiveness of the Franchising Code of Conduct (the Code).
The Government recognised the importance of the franchising sector to the economy, however in line with the recommendations of the Report, decided that action was required to improve fairness and transparency for franchisees.
Further, on 2 September 2020, the Federal Opposition released its own response to the Report by way of a private members bill to the Senate. This may alter the Government’s proposed timing of the proposed reforms and their implementation.
Importantly, until many of the changes are finally drafted and agreed between the Government and Opposition, the final changes to the Code and their impact on the franchising industry in general, remain to be seen. The Government has not yet announced a timetable for introducing its proposed amendments to the Code. However it is widely expected to occur later this year or early next year.
We have summarised the salient points of the Government’s response:
|Increased disclosure requirements||Improvement to the information that must be disclosed to the prospective franchisees, including:
|Disclosure and Cooling Off time periods||These will be clarified, although the proposal is for franchisee termination at any time up to 14 days after the last of certain events have occurred, such as:
|Significant capital expenditure||
|Access to information||
We note for completeness that the above proposed reforms are additional to those already implemented to the Code on 1 June 2020, which are specific to the Automotive sector and include the introduction of a new Part 5 of the Code to give greater protections for automotive dealers.
Long Saad Woodbridge have for over 20 years advised franchisors and franchisees on their compliance with the Code and will continue to monitor developments and provide updates.
Important Disclaimer: The content of this publication is general in nature and for reference purposes only. It is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.