Preparing for the New Franchising Code of Conduct: What You Need to Know by 1 April 2025

On 1 April 2025, a revised Franchising Code of Conduct (the “New Code”) will take effect in Australia, introducing significant updates designed to enhance transparency, streamline dispute resolution, and adapt to the evolving franchising landscape. As a franchise owner or operator, staying ahead of regulatory changes is critical to protecting your business. At DB & Co Legal, we’re committed to helping our clients navigate these changes with confidence. Claire Dolesny and Travis Burch, provide a breakdown of the key updates and steps you can take to prepare.

Why the Changes Matter

The New Code was announced following a comprehensive review of the previous framework and aims to address gaps in fairness and efficiency while responding to modern challenges in the franchising sector. The New Code will apply to all franchise agreements entered into, transferred, renewed or extended on or after 1 April 2025. The Competition and Consumer (Industry Code – Franchising) Regulations 2014 will continue to apply to franchise agreements entered into before 1 April 2025.

Whether you’re a franchisor looking to refine your agreements or a franchisee seeking clarity on your rights, these updates will impact how you operate. With the implementation date fast approaching, now is the time to assess your compliance and ensure your business is ready.

Key Changes to the Franchising Code of Conduct

1. Simplified Disclosure Requirements

The New Code introduces a more streamlined disclosure process, reducing administrative burdens while maintaining transparency. Franchisors will need to provide a concise Key Facts Sheet alongside the disclosure document, ensuring franchisees can quickly grasp essential details like costs, obligations, and termination rights. This change aims to empower prospective franchisees to make informed decisions without wading through excessive paperwork.

2. Enhanced Exit Arrangements

Termination and exit processes have been clarified and strengthened. The New Code mandates a minimum notice period for termination in certain circumstances and introduces provisions for franchisees to propose buyers when exiting, provided they meet reasonable franchisor standards. This shift offers greater flexibility and fairness, particularly for franchisees winding down their operations.

3. Improved Dispute Resolution

A revamped dispute resolution framework emphasizes mediation and conciliation, with clearer timelines and processes to resolve conflicts efficiently. The New Code also expands access to free or low-cost dispute resolution services, reducing the financial strain of legal battles for both parties. For businesses, this means faster resolutions and less disruption.

4. Penalties for Non-Compliance

Regulatory oversight is tightening, with increased penalties for breaches of the Code. Fines for failing to provide accurate disclosure or comply with good faith obligations could reach up to $10 million for larger franchisors, signaling a stronger push for accountability across the sector.

5. Adaptations for Digital and New Business Models

Recognizing the rise of online franchising and innovative business structures, the New Code includes provisions to address digital disclosures and multi-unit franchise arrangements. This ensures the framework remains relevant in a rapidly changing commercial environment.

How to Prepare Your Business

With the New Code taking effect, proactive steps can save you from costly oversights. Here’s what we recommend:

• Review Your Franchise Agreements: Ensure franchise agreements and processes align with the New Code’s requirements, particularly around disclosure, termination, and dispute resolution. Using outdated agreements for any new, renewed or extended franchises could expose you to penalties or disputes.

• Update Disclosure Documents: Prepare a Key Facts Sheet and revise your disclosure materials to meet the simplified standards. Accuracy and clarity are non-negotiable under the heightened penalty regime.

• Train Your Team: Equip your staff with an understanding of the changes, especially if they handle franchisee onboarding or compliance. Missteps due to ignorance won’t hold up as a defence.

• Seek Expert Advice: Partner with legal professionals who specialize in franchising to audit your processes and tailor your strategy. At DB & Co Legal, our team has deep experience guiding clients through regulatory shifts like this one.

What This Means for Franchisors and Franchisees

For franchisors, the New Code is an opportunity to build trust with franchisees by embracing transparency and fairness. It’s also a reminder to tighten internal processes to avoid penalties. For franchisees, these changes provide greater protections and clarity, leveling the playing field in negotiations and exits. Both parties stand to benefit from a more balanced and efficient system—if they’re prepared.

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