Recent amendments to Franchising Code of Conduct

Recent amendments have been made to the Franchising Code of Conduct, resulting in a new Code coming into effect from 1 April 2025 (New Code).

Who does the New Code apply to?

The New Code applies to all franchise agreements entered into from 1 April 2025. If an existing franchise agreement is transferred, renewed or extended on or after 1 April 2025, the New Code will also apply. The New Code does not apply to franchise agreements entered into prior to 1 April 2025 and there is a transition period, with some provisions of the New Code commencing on 1 November 2025.

What are the main changes?

The key changes are summarised as follows:

• Civil Penalty Provisions – Civil penalties will apply to most breaches of the New Code, equal to 600 penalty units for each breach ($198,000).
• Restraint of Trade – Franchise agreements entered into (or existing franchise agreements transferred, renewed or extended) from 1 April 2025 cannot contain a post-termination restraint of trade provision that would apply in circumstances where a franchisee seeks to renew or extend the agreement and the franchisor does not agree to the renewal or extension.
• Compensation for early termination and return on investment – Franchise agreements entered into from 1 November 2025 must contain a provision that a franchisee will be compensated if a franchisor terminates the agreement before it expires because the franchisor withdraws from the Australian market, rationalises its networks in Australia, or changes its distribution models. The agreement also must provide the franchisee with a reasonable opportunity to make a return on any investment which the franchisor required the franchisee to make.
• Termination for serious breach – the New Code provides that franchisors may terminate a franchise agreement on certain grounds amounting to a serious breach with seven days’ notice, without the franchisee having the ability to progress the matter to alternative dispute resolution.
• Specific purpose funds – marketing and co-operative funds have been rolled into the new definition of “specific purpose funds”. Specific purpose funds are funds that are controlled by the franchisor that the franchisee must contribute to for a specific purpose. The obligations relating to specific purpose funds are largely the same as they were for marketing funds.
• Disclosure Documentation – There are changes to the information that a franchisor must disclose (from 1 November 2025) before entering into the franchise agreement. The changes include that a Key Facts Sheet is no longer required, a statement must be provided on whether a franchisee is required to undertake significant capital expenditure, franchisors must disclose current proceedings under the Fair Work Act 2009 and information must be provided on competition in the market in the site or territory. Franchisees seeking to renew their franchise agreement can now also opt out of receiving Disclosure Documentation and the 14 day cooling off period.

Page Seager is able to assist with advice on your rights and obligations under the New Code.