Legal Article

Changes to Franchising Code of Conduct July 2010

Changes to the Franchising Code of Conduct came into effect on 1 July 2010.

As a result of the changes, franchise disclosure documents will now need to contain additional information. The prior form of disclosure document may no longer be used.

The additional information in the disclosure document includes, significantly, information about payments to be made by the franchisee to persons other than the franchisor which are reasonably foreseeable by the franchisor. This may mean, in effect, that franchisors are now required to disclose operating costs in relation to a franchise.

Other changes to the disclosure document include new categories of disclosure about:

unforeseen capital expenditure
unilateral contract variation
costs of dispute resolution
confidentiality obligations
amendments to the franchise agreement before the sale of a franchise.

For agreements entered into from 1 July 2010, the changes to the Code also affect, among other things, the procedure in relation to the renewal or extension of franchise agreements and certain aspects of the dispute resolution process.

Notification at End of Term

For agreements with a term longer than 6 months, the franchisor will now have to notify the franchisee at least 6 months before the end of the franchise agreement of the franchisor’s decision whether or not to renew or extend the franchise.

Dispute Resolution

The parties to a dispute who attend mediation must also try to resolve the dispute in a “reconciliatory manner”, and the Code contains details as to what actions may comprise a “reconciliatory manner”.

Detailed advice about all of the changes to the Code and how they affect your business is available upon request from The Franchise Lawyer.