Updates to Australian Franchising Code

On 1 June the Australian Government released details of the amendments to the Australian Franchising Code.

The key changes are summarised as follows:

• An obligation on franchisors to provide a Key Facts Sheet in a prescribed form including important information from the disclosure document.
• Changes to clauses setting out the timing for provision of disclosure, the Information Statement and leasing documents.
• Changes to the form of the disclosure document including a requirement to provide further information regarding supplier rebates.
• Changes to and extension of the cooling off provisions including new provisions regarding cooling off on a transfer
• Introduction of a requirement for franchisors to provide a substantive response to a request for early termination.
• A requirement for notice prior to termination in special circumstances (“immediate termination” events) and an ability for the franchisee to delay such termination to permit alternative dispute resolution to be completed.
• Increased disclosure requirements regarding significant capital expenditure and an obligation on a franchisor to discuss the same with the franchisee prior to entering into the franchise agreement.
• A prohibition on franchisors recovering legal document costs other than an initial fixed fee.
• Provision of additional information regarding any lease from a franchisor or its associate.
• Increased protection for new vehicle dealership franchisees from early termination and non-renewal.

The new dispute resolution provisions will apply immediately. Other than these changes and the changes to the form of disclosure document, the amendments will apply to agreements entered into, extended or renewed on or after 1 July 2021.

Generally, the changes to the disclosure document form can be made between now and 1 November 2021. However, it may be in a franchisor’s interests to make at least the following amendments to template documents before 1 July 2021:

• Amendments to both the franchise agreement and disclosure document to address the prohibition on passing on legal costs.
• Amendment to the disclosure document to provide further information on potential capital expenditure which may need to be incurred during the term of the franchise.

If you would like more information on this update, please contact Gordon Drakes or your usual contact in the Fieldfisher Franchising Team.