The Federal Government is currently undertaking a review of the
franchising laws, in particular, the efficacy of the 2008 and 2010
amendments to the
Franchising Code of Conduct ("Franchising
A four month industry review conducted by industry expert, Mr
Alan Wein, made 18 recommendations which included:
an express obligation on the parties to act in good faith
a stronger enforcement regime for Franchising Code
improving franchisor disclosure
better dispute resolution mechanisms
These recommendations represent the largest overhaul of the
Franchising Code since its inception and if these recommendations
are adopted there will be significant issues for franchisors to
A consultation paper has been released today in response to the
Wein Report, seeking further submissions from stakeholders on the
proposed amendments. It can be accessed
SUMMARY OF RECOMMENDATIONS ARISING FROM THE REVIEW
A significant focus of the recommendations is to improve
disclosure from franchisors to franchisees, by including the
franchisors must notify the franchisee of its intention to
renew the franchise agreement under clause 20A of the Franchising
Code and provide disclosure documents when providing this
franchisee/franchisor rights in conducting and benefitting from
online sales are subject to additional disclosure obligations
franchisors are to develop and provide a generic risk statement
to prospective franchisees at the first point of contact,
summarising key risks and issues in operating a franchise
short form disclosure is to be abolished
These recommendations are aimed to prevent franchisors from
acting unconscionably in relation to financial matters,
prohibiting franchisors from imposing unreasonable significant
unforeseen capital expenditure on franchisees
imposing further reporting and regulatory requirements on
franchisors in relation to the franchisor's marketing fund,
including an annual audit of the marketing fund statement
Transfer, renewal or end of a franchise
conferring a specific right for the franchisee/franchisor to
terminate a franchise agreement when an administrator is appointed
to the other party
providing that franchisors are entitled to have all information
required to be able to consider a franchisee's request to
transfer or novate the franchise agreement, before the franchisor
is "deemed" to have granted consent
restraint of trade clauses cannot be enforced against the
franchisee in certain circumstances where the franchise agreement
has not been renewed by the franchisor
Currently, some franchisors include attribution of legal costs
clauses in the franchise agreement in return for a lower franchise
fee. The report recommends a prohibition on franchisors to
attribute legal costs in relation to dispute resolution, unless by
Further, to improve a franchisee's access to justice, the
franchisor cannot litigate outside of the franchisee's
Introduce an express obligation for both the franchisee and
franchisor to act in good faith. This may lead to situations where
the franchisor/franchisee may have a right under the franchise
agreement, however, cannot exercise it as it would breach their
obligation to act in good faith.
The report recommends increasing enforcement powers of the ACCC
and courts in relation to breaches of the Franchising Code. For
example, civil pecuniary penalties of up to $50,000 may be imposed
for breaches of the Franchising Code.
WHERE TO FROM HERE?
This is an opportunity to have some input into the regulation of
the franchising industry which we know is of significant interest
to many of our clients. We intend to make submissions in response
to the consultation paper and would welcome any feedback you may
have from your perspective as to the proposed amendments and any
others which may not have been considered.
Hunt & Hunt can also assist you with any submissions you may
like to make directly in response to the consultation paper. If you
would like us to make a submission on your behalf, please contact
us. Submissions close on 9 July 2013.
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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