Compliance and Regulatory Guidelines for Franchising in the Construction Industry

In Short

• Franchising in the construction industry requires compliance with both the Franchising Code of Conduct and specific construction regulations.

• Franchisors must provide accurate financial disclosures, including setup costs, fees and financial performance, to potential franchisees.

• Adherence to licensing, insurance, employment laws and environmental regulations is essential for legal operation.

Tips for Businesses

Ensure your franchise agreements and disclosure documents comply with the Franchising Code of Conduct. Maintain up-to-date knowledge of construction industry regulations, including licensing and insurance requirements. Consult legal professionals to navigate the complexities of franchising within the construction sector effectively.

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Table of Contents

• Franchising Code of Conduct
• Financial Disclosure
• Good Faith Obligations
• Construction Industry Regulations
• Licensing Requirements
• Insurance Requirements
• Employment Laws
• Environmental Compliance
• Key Takeaways
• Frequently Asked Questions

If you are considering franchising in the construction industry, you must understand and adhere to specific compliance and regulatory guidelines. This means following the necessary regulations both for franchising and construction. This article will explain the key aspects of both that you need to consider, to ensure that your franchise operates within the legal framework.

Franchising Code of Conduct

As a franchisor or franchisee in the construction industry, you must comply with the Franchising Code of Conduct. This mandatory industry code regulates the conduct of franchising participants in Australia. You should familiarize yourself with its requirements, which include:

• disclosure obligations; 
• good faith dealings; 
• dispute resolution procedures; and 
• termination processes.

It is essential that you thoroughly review and understand these obligations to avoid potential legal issues.

Financial Disclosure

One important obligation you have as a franchisor is that you must provide accurate financial information to potential franchisees. This includes:

• initial setup costs; 
• ongoing fees and royalties; 
• estimated working capital requirements; and 
• historical financial performance (if applicable). 

Good Faith Obligations

Good faith obligations are fundamental to franchising in Australia, and you must ensure that your franchise system adheres to these principles. The Franchising Code of Conduct mandates that both franchisors and franchisees act in good faith in their dealings with each other. This means you must act honestly, cooperatively, and with reasonable regard for the other party’s interests. 

Good faith obligations extend to all aspects of the franchise relationship, including:

• negotiations; 
• performance of the agreement; 
• dispute resolution; and 
• termination processes. 

You should demonstrate good faith by being transparent in your communications, providing necessary support and information, and considering the legitimate business interests of your franchisees. 

It is important to note that good faith does not require you to act in a way that is detrimental to your commercial interests, but rather to balance your interests with those of your franchisees. By consistently upholding good faith principles, you can foster trust, promote fair dealings, and build a more resilient franchise network in the construction industry.

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Construction Industry Regulations

In addition to franchising regulations, you must comply with construction-specific laws and regulations. These include:

• the Building and Construction Industry Security of Payment Act 1999 (NSW);
• the Building and Development Certifiers Act 2018 (NSW);
• the Building and Development Certifiers Regulation 2020 (NSW) (or equivalent legislation for your respective state or territory);
• Work Health and Safety (WHS) regulations;
• environmental protection laws; and 
• Australian Standards for construction. 

Further, depending on the area of construction you operate in, there may be additional industry codes you must adhere to. You should ensure that your franchise system has processes to monitor and comply with these regulations across all franchisee operations.

In particular, you should implement quality assurance standards. These may include:

• adherence to Australian Standards for construction; 
• regular audits and inspections; 
• and ongoing training and support for franchisees. 

Licensing Requirements

You must ensure your franchise system complies with state-specific licensing requirements for construction businesses. Each state and territory has its own licensing body, such as the:

• NSW Fair Trading;
• Victorian Building Authority;
• Queensland Building and Construction Commission; and
• The Building Commission of Western Australia.

As a franchisor, you should clearly outline the licensing requirements for your franchisees in your franchise agreement and disclosure document. It is your responsibility to ensure that all franchisees maintain the necessary licenses to operate legally. If a franchisee is operating without the required license this is likely to cause detriment to your franchise network as a whole, including through damaging brand reputation.

Insurance Requirements

Your franchise system must have appropriate insurance coverage. This typically includes:

• public liability insurance;
• professional indemnity insurance;
• workers’ compensation insurance; and 
• contract works insurance. 

You should ensure that your franchise agreement specifies the insurance requirements for franchisees. It is advisable to regularly review and update these requirements to ensure they remain adequate for the risks associated with your construction franchise.

Employment Laws

Your franchise system must comply with Australian employment laws, including:

• the Fair Work Act 2009; 
• modern awards relevant to the construction industry; and 
• the Superannuation Guarantee (Administration) Act 1992. 

You should ensure that your franchisees understand their obligations as employers. Providing ongoing training and support in this area can help prevent employment-related issues within your franchise network.

Environmental Compliance

Construction franchises must adhere to environmental regulations, including:

• the Environmental Protection and Biodiversity Conservation Act 1999;
• state-specific environmental protection laws; and 
• waste management and recycling regulations. 

You should develop and implement environmental compliance policies across your franchise network to ensure consistent adherence to these regulations.

Key Takeaways

Franchising in the Australian construction industry requires careful attention to compliance and regulatory guidelines. You must ensure your franchise system adheres to both franchising-specific regulations and construction industry laws. By implementing robust compliance measures, you can build a successful and legally compliant franchise network in the construction sector. Remember to regularly review and update your compliance processes to keep pace with changing regulations and industry best practices.

If you are franchising your construction business, our experienced franchising lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers who can answer your questions and draft and review your documents. Call us today at 1300 544 755 or visit our membership page.

Frequently Asked Questions