Following the Government's review of the Franchising Code of Conduct, 18 recommendations have been made offering a range of proposed changes. The views of franchisors, franchisees, legal practitioners and regulators have been taken into account in an effort to improve the future of franchising.
Some important recommended changes include:
- Introduction of fines of up to $50,000 for breach of the Code. This aims to provide a fast enforcement response and reduce the cost and delays of court proceedings;
- Inclusion of an express obligation to act in good faith;
- Further clarification and management of Marketing Funds to be operated like a trust account with annual audits, compulsory contribution from franchisor-owned outlets and other requirements;
- Recognition of franchisees as creditors where the franchisor becomes insolvent. This would be done by apportioning the franchise fee over the term of the franchise which will create a debt owed to the franchisee. As creditors, franchisees can be given information and have more involvement in the administration process and the future of the franchise.
Please note that these changes are only recommendations at this stage and have not been passed into legislation.
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.
