By Rod Commins, Patterson Houen Commins, Lawyers, Sydney.
The new Franchising Code of Conduct, which is a mandatory code regulated by the Australian Competition and Consumer Commission, takes effect, subject to some transitional provisions, on 1 January 2015 so, if you are involved in franchising, you must get up to speed with the new requirements, the key elements of which are summarised as follows:
- Obligations of mutual good faith, but parties may still act in their own legitimate commercial interests;
- Timing and simplification of disclosure and information statements, including disclosing any rights and obligations arising from online trading activities;
- Capital expenditure limitations;
- Greater transparency in the use and accounting for “marketing and advertising funds”;
- Limitations on the right of a franchisor to enforce post-franchise restraints of trade;
- Restrictions on a franchisor’s rights of early termination without cause.
Serious breaches of the Code will draw financial penalties and/or infringement notices.
The Code covers not only franchises strictly so-called, but other arrangements whereby a system or scheme is developed and marketed by one party for use by another.
You can find further detailed information about the above changes by accessing the ACCC website www.accc.gov.au and following the links to “Franchising” and then to the updated Franchiser Compliance Manual and the Franchisee Manual. Guidance and assistance is also readily available from your local MSI adviser.