INSIGHTS
THE NEW RULE BOOK
Revisions to the Franchising Code of Conduct aim to help franchisees. Check them out.
F
ranchising rules and regulations are changing. The industry code, the Franchising Code of Conduct, governs the relationship between franchisees and franchisors. In 2017 it underwent a parliamentary inquiry, which questioned the code’s effectiveness; a taskforce in 2019 made various recommendations; and now the federal government has authorised some revisions. New rules are in place from July 1 2021 so that means if you’ve looked at the code earlier than July, some of that information will now be out of date. The revisions imposed have been introduced as a way of making franchisees more secure in the franchise relationship with the franchisor. Key to the reforms have been increased transparency and boosting franchisees’ rights. While the introductions have been
welcomed by official bodies such as the Franchise Council of Australia and the Australian Small Business and Family Enterprise Ombudsman, implementing the rules is more of a challenge for franchisors and lawyers. Specialist franchise lawyer Robert Toth of law firm MMRB believes the changes after the three-year delay from the inquiry will help to better protect franchisees. But he points out there is still commercial risk going into any business opportunity and getting expert advice will limit the risks. As a franchise buyer, there are some crucial changes you need to consider.
WHAT’S CHANGED? A new key fact sheet has to be supplied by the franchisor when you receive the company’s disclosure document. It aims to provide an improved scope of financial disclosure, including information on
goodwill and supplier rebates. Franchisors must provide disclosure around leasing and any franchisor conflict of interest. If you decide to go ahead and buy a franchise, whether this is from an existing franchisee, or a brand new site you are purchasing from the franchisor, you will now have a 14-day cooling off period. This is a doubling of the previous seven-day cooling off period. This means if you change your mind after first paying any non-refundable money to the franchisor or signing the franchise agreement within the 14-day cooling off period, you can still exit the franchise. Although you are entitled to a refund the franchisor can retain a certain amount from the money you paid provided this is clearly set out in the agreement and disclosure document. Similarly, franchisees are now able to request the early termination of their franchise agreement in writing at any point
AUG/OCT 2021 | 14 | WWW.FRANCHISEBUSINESS.COM.AU
