Australia: Franchise Advisory Councils

Franchising Focus

The majority of franchise networks seek the input of their franchisees on various issues. Often franchisors seek to formalise these discussions via the establishment of a committee, council or other body of representatives, which is often referred to as a "Franchise Advisory Council" (FAC).       

FACs are participated in, and generally initiated, facilitated and funded by the franchisor, and are "franchisor led". They are different from franchisee associations formed independently of the franchisor to discuss supply and other business issues, and which franchisors do not sponsor or lead.  

The general purposes which a franchisor has for a FAC are to:

  1. facilitate and enhance orderly communication between franchisor, franchisee and other parties in the network; and
  2. develop and implement strategies and ideas for the betterment of the network.  

If a franchisor does not structure a FAC correctly and with due consideration of how it is to operate now and in the future, it can create significant headaches for the franchisor. Set out below is a checklist of issues to consider when establishing or "revamping" a FAC.   

Issues to be considered

The FAC should not be a separate legal entity

  1. The FAC should be a committee or council only.  If a FAC were a cooperative or association recognised at law as a separate entity, the:
    (a)cooperative or association might need to be incorporated pursuant to the Corporations Act 2001 (Cth) and/or registered under the various State Cooperative Acts; and
    (b) FAC may be able to bring legal proceedings in its own name (e.g. against the franchisor).
  2. The rules or guidelines regarding the operation of the FAC should expressly state that the FAC is not itself a legal entity.  

The rules establishing the FAC should be documented

  1. The "rules" or "guidelines" (Rules) regarding the operation of the FAC should always be documented, so that all parties are clear on what it is and their role within it.  
  2. The Rules should be set out in a dedicated document, and not form part of the franchise agreement.  This is because setting them out in the franchise agreement will limit franchisors' ability to alter the Rules and the structure of the FAC, as franchise agreements can only be altered with franchisee's consent.  
  3. The Rules should be reviewed to ensure that they do no limit the franchisor's rights under the franchise agreement.  Indeed, they should expressly state that:
    (a) nothing in them affects or limits in any way the franchisor's rights under any franchise agreement;
    (b) the franchisor will not be bound in any way to adopt the suggestions, recommendations or advice of the FAC (if this is to be the case); and
    (c) the Rules do not require the franchisor to consult with, or seek the approval of franchisees, on any issues (if this is to be the case).
  4. The Rules should:      
    (a) avoid the use of words like "consult" or "take into consideration", which could be interpreted as requiring the franchisor to seek the approval of the FAC in relation to certain issues;  
    (b) expressly allow the franchisor to dissolve or change the structure of the FAC at any time;
    (c) not oblige the franchisor to disclose information to the FAC (e.g. information regarding the possible sale of the business etc); and
    (d) to a certain extent, set out practical issues, such as:
    (i) how many franchisee members will sit on the FAC;
    (ii) how franchisee members will be appointed to the FAC (e.g. elected by the network or appointed by the franchisor);
    (iii) whether the franchisor will have the right to veto nominations for election by the network;
    (iv) how often  the FAC will meet; and
    (v) what issues the FAC will consider.  

Careful consideration should take place before the FAC is given any sort of decision-making power.  The more power given to a FAC the more detailed and extensive the Rules need to be.

The franchisor will have to comply with the Rules similarly to franchisees, so it is important that they are clear and precise, and provide the franchisor with the required flexibility.


FACs can be very effective tools in terms both of franchisee engagement and the development of new ideas and initiatives.

However, franchisors should avoid the temptation to "dress up" the Rules and the FAC to look like more than they are. For example, if the franchisor does not want to be bound to seek the approval of the FAC before making marketing decisions, or indeed to raise marketing issues with the FAC, the Rules should not imply that the franchisor will do so.    

Clear and concise rules will assist in the operation of the FAC, help to avoid misunderstandings, and ensure that the franchisor's decision making power is not diluted.  

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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