The Australian Federal Government has amended the Franchising Code in an effort to balance the power relations between franchisors and franchisees. The changes come from the 2019 Fairness in Franchising Report.

As of 1 July 2021, Franchisors are required to disclose additional information regarding capital expenditure, marketing funds, rebates and earnings information, lease disclosure statements and include a Key Fact Sheet with the disclosure statement.

The franchisor cannot expect a franchisee to undertake significant capital expenditure during the franchisee agreement term, unless it is disclosed prior to the term, approved by the majority of franchisees, is required to comply with legislative obligations or is agreed to by the franchisee/s.

Under the changes, franchisees can propose to terminate their franchisee agreement via written notification at any time, to the franchisor. If the franchisor does not agree to the termination, they must disclose their reasons and the franchisee would enter a dispute resolution process.

Other changes include, but are not limited to, an extended cooling off period of 14 days, franchisor cannot not make the franchisee pay legal fees to execute the agreement, franchisors cannot vary the agreement mid-term, unless the franchisee agrees, double penalty against non-compliant franchisors.

Franchisees can expect updated disclosure agreements to comply with the new Code. We welcome these changes for franchisees to the freedom it affords them to run their business to maximum profit potential. Afterall, that is why people go into small business in the first play.

If you would like to learn more about how to structure your business for increased profit potential, contact us.