While franchising is a lucrative opportunity to grow your business, it comes with its distinct set of rules and regulations. The Franchising Code of Conduct is one of those regulations you and your franchisee must adhere to when partnering up.
According to top franchising consultants, the Code is a part of the Australian Consumer Law and aims to regulate the franchising sector with a good faith obligation.
You and your franchisee have to oblige to the Code before signing the Franchise Agreement, during the term of the contract and when terminating the agreement.
In today’s blog, we discuss the Franchising Code of Conduct in Australia to help understand the regulation and smoothly carry out the franchising processes.
So, let’s get started!
What’s The Franchising Code Of Conduct?
The Franchising Code of Conduct regulates the franchising industry, ensuring franchisors don’t take advantage of franchisees through unfair business practices.
It covers a wide selection of franchise-related topics, such as i) What franchisors shall disclose to their franchisees, ii) The terms of the franchise agreements, iii) How you can transfer and terminate franchises, iv) Franchise and franchisors dispute related matters,
v) Regulations related to vehicle dealerships, vi) How the franchise disclosure register operates, vii) Additional information on franchise agreements, disclosure documents and key facts sheets.
Who Does The Franchising Code Of Conduct Apply To?
The Code applies to everyone engaging in franchising activity, including franchisees, franchisors, and sub-franchisors in Australia.
However, there are some terms and conditions regarding the application you should be aware of. For instance, the Code may not apply if your business is a mutual entity or an applicable cooperative. Also, if your business comes under industry codes, like the Unit Pricing Code, the Franchising Code may not apply to you. It’s best to speak with experienced franchising consultants to understand the application and terms and conditions of the Franchising Code.
Who Regulates The Code?
The Australian Competition and Consumer Commission typically regulates the Franchising Code. However, they don’t handle every individual franchise dispute. Instead, they take notice of franchisors acting against the franchisees or the public interest.
Consumers or franchisees can report franchisors of the ACCC if they don’t adhere to applicable laws or the Code. If the ACCC finds the reports to be valid, they can take enforcement actions, such as
i) Execute administrative resolution and ask the franchisor to stop or start doing certain things,
ii) Take the franchisor to court if they don’t comply,
iii) Issue infringement notice to the noncompliant franchisor that includes court-enforced undertaking or financial penalties,
To give an example, the authorities forced the Jim’s Group Pty Ltd to pay $24,420 in penalties in October 2022. The franchisor did not adequately disclose information to a franchisee. The ACCC considers this type of conduct as making misleading or false representations.
What Should You Do During Disputes?
Disputes in business are inevitable. Most of the time, franchisees and franchisors can smoothly resolve their conflicts by communicating, referring to the franchising agreement and finding a common ground.
However, if you have already tried these methods and still can’t resolve the issue, consider contacting the Australian Small Business and Family Enterprise Ombudsman. They can provide you with advice and guidance on dispute resolution. Likewise, your state’s small business commissioner can help you resolve the quarrel.
If that does not work either, consult a lawyer. They can tell you if going to court will be a worthy decision. Based on the severity of the situation, you can consider connecting with the ACCC.
Final Thoughts
The Franchising Code of Conduct is a mandatory document that franchises must adhere to in Australia. However, before you sign up for this and the franchising agreement, it’s essential to speak with franchising consultants and understand all its jargon. Misunderstanding of the regulation can lead to litigation and harm your business reputation. Hence, precaution is necessary.
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