Reading time: 5 minutes

From July 2021, the Australian Government will begin rolling out numerous changes to the Franchising Code of Conduct (the Code) to address a perceived power imbalance between franchisors and franchisees. These changes stem from a Fairness in Franchising Report and an Exposure Draft of proposed changes to the Code, following a Parliamentary Inquiry into the franchising sector and the Code’s effectiveness. 

This article outlines the anticipated future Code changes. It also explains a minor change to Annexure 2 – Information Statement, which franchisors use to provide prospective franchisees with information. This change took effect on 12 January 2021.

What is the Information Statement Change?

This change includes:

  • updating Annexure 2 – Information Statement to reference the ACCC’s free online education courses available to franchisees; and
  • a small administrative change to the legislative history.

What does it mean for me?

Franchisors should now use the new Annexure 2 – Information Statement when issuing franchise documentation to prospective franchisees.

As always, a franchisor should ensure:

  • the Information Statement is provided to franchisees at the earliest opportunity, usually after submitting an expression of interest form; and
  • that you refer to (and including in your Disclosure Document) the most current version of the Code.

What Are the Proposed Changes?

Some new disclosure obligations have been proposed, including:

  • the introduction of a Key Facts Sheet, to be provided with the disclosure document. The Key Facts Sheet will summarise the information found in the disclosure document. Its structure is not yet final;

  • disclosure of additional information concerning capital expenditure, marketing funds, rebates and earnings information;

  • a franchisor can provide the disclosure document in an electronic or printed form;

  • franchisors who sublease or sub-licence a lease to franchisees must provide the lease and relevant lease disclosure statements when providing the disclosure document. Franchisors must provide these at least 14 days before executing the franchise agreement; and

  • franchise transfers will require the disclosure document, even where a new franchise agreement is not required.

Capital Expenditure

The franchisor cannot require a franchisee to undertake significant capital expenditure during the franchise agreement term. The franchisor has some exemptions where expenditure is:

  • disclosed in the disclosure document before entering, renewing or extending the term of the franchise agreement;
  • approved by a majority of the franchisees;
  • incurred to comply with legislative obligations; or
  • agreed to by the franchisee(s).

Marketing Funds

Terminology in the marketing fund sections will change. The obligations concerning marketing funds (and cooperative funds) will remain the same. However, the Code will replace the term ‘franchisors’ with the term ‘fund administrators’, capturing franchisors, individuals and master franchisors who operate a fund.

Similarly, the fund administrator will no longer need to maintain a separate account with a ‘bank’ but can maintain a separate account with a ‘financial institution’ instead.

Early Exit by a Franchisee

Under the changes, franchisees can propose to terminate their franchise agreement via a written notification at any time, to the franchisor. There are no limits on what reasons the franchisee may have to terminate.

Franchisors will have 28 days to provide a substantive written response to the proposal, to which mandatory good faith obligations will apply.

If the franchisor does not agree to the termination, they must include their refusal reasons. The franchisee can go through the usual dispute resolution processes provided by the Code.

However, franchisors that refuse a termination request could be seen to have breached the Code’s good faith obligations or to have engaged in unconscionable conduct.


The draft code suggests that franchisors can still terminate an agreement under the Code’s ‘special circumstances’ termination rights. However, franchisors will be required to provide the franchisee with seven days notice and their reasons.

If the franchisee disputes the termination, the parties can refer the matter to an alternative dispute resolution process, including arbitration (if mutually agreed).

Cooling-Off and Transfer

Some changes to the franchisee cooling off period include:

  • extending it from seven days to 14 days;
  • starting it on the later of (no longer the earlier of):
    • entry into an agreement (including ancillary documents); or
    • paying money under an agreement;
  • applying the cooling-off to transfers as well as new agreements; and
  • if the franchisee provides leasing documentation.

Legal Costs

Under the changes, franchisors cannot make the franchisee pay all or part of the legal costs to prepare, negotiate, or execute the franchise agreement.

There are some exemptions to this if the franchise agreement provides a precise dollar figure.

Unilateral Variation (Retrospective)

Franchisors cannot vary the franchise agreement with retrospective effect unless the franchisee agrees. However, this does not apply if the majority of the franchisees to be affected by the change agree to the variation.

Alternative Dispute Resolution (ADR) Process

The mediation definition will be removed and replaced with other ADR options such as arbitration, conciliation and mediation.

Penalty Increases

The Code changes will double the penalties imposed on non-compliant franchisors from 300 penalty units to 600 penalty units.


A current penalty unit is $222, so 600 penalty units will cost a franchisor $133,200.

When Will the Proposed Changes Commence?

Most of the proposed changes will commence 1 July 2021. However, the draft legislation is currently in a review phase, so some changes may take longer. It is unclear whether some changes will apply to existing franchise agreements or only new agreements entered into after 1 July 2021.

Key Takeaways

The Franchising Code of Conduct is undergoing change, with some changes already commenced and others due to commence later this year. Franchisors should start updating their franchise agreements and disclosure documents to ensure they are operating their network per the most recent version of the Code.

If you require assistance with incorporating these changes or want further advice on the Code changes, LegalVision’s franchise lawyers can help. Call 1300 544 755 or complete the form on this page.


Everything You Need to Know about SaaS Agreements

Thursday 7 April | 11:00 - 11:45am

Understand which contracts will protect your SaaS contract from risk, and how. Register for free today.
Register Now

What to Consider When Buying a Tech or Online Business

Wednesday 13 April | 11:00 - 11:45am

Learn how to get the best deal when buying a tech or online business. Register for our free webinar today.
Register Now

Corporate Governance 101: Responsibilities for New Directors

Wednesday 27 April | 11:00 - 11:45am

If you are a new company director, join our free webinar to understand your legal compliance obligations. Register today.
Register Now

Rogue Directors and Business Divorces: How to Remove a Director

Thursday 28 April | 11:00 - 11:45am

Removing a board director is not simple. Join our free webinar to learn how to handle rogue directors. Register today.
Register Now

Employment Essentials for Tech Businesses

Thursday 5 May | 11:00 - 11:45am

Protect your tech business and your employees by understanding your employment legal obligations. Register for our free webinar today.
Register Now

How to Protect and Enforce Your Trade Mark

Wednesday 11 May | 11:00 - 11:45am

Protect your business’ brand from copycats and competitors. Register for this free webinar to learn how.
Register Now

How Franchisors Can Avoid Misleading and Deceptive Conduct

Wednesday 18 May | 11:00 - 11:45am

Ensure your franchise is not accused of misleading and deceptive conduct. Register for our free webinar today.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer