The Federal Government has confirmed it intends to press ahead
with its plans to extend the definition of "consumer" in
proposed new national consumer credit legislation to include
businesses. By doing so, and as a result of the provisions dealing
with "standard form" contracts, franchise agreements are
likely to come under scrutiny. The Minister has rejected calls for
a specific exemption for franchise agreements notwithstanding that
the Franchising Code of Conduct provides a comprehensive regulatory
The Franchise Council of Australia and other business groups are
lobbying against the proposed changes, arguing among other things
that such changes will add another layer of uncertainty on the
franchise relationship. Deacons prepared the industry submissions
for the FCA and continues to assist with lobbying.
Franchise systems should consider preventative action, reviewing
their recruitment practices and documentation. Areas of focus
Recruitment processes, to ensure there is adequate time for the
franchisee to consider the documentation, and for negotiation and
Training, to ensure recruitment staff do not adopt a "take
it or leave it" approach
Franchise agreements, to ensure that they do not contain
provisions greater than reasonably necessary to protect the
legitimate interest of the franchisor
Collateral agreements, to ensure they are not unnecessarily
Franchise systems who enter into contracts with consumers or
small business customers as part of their normal business
activities (eg telecommunications companies, car rental companies)
should similarly review the contracts to ensure they comply with
the proposed new law.
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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On 12th November 2016, new laws will commence to protect small businesses from unfair terms in standard form contracts.
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