Franchising code of conduct

Definition

The franchising code of conduct is a mandatory industry code established under the Competition and Consumer Act 2010 in Australia that governs the conduct of franchising businesses and outlines the rights and responsibilities of franchisors and franchisees. 

What is the franchising code of conduct?

The franchising code of conduct seeks to balance the interests of franchisors and franchisees by encouraging a transparent and equitable franchising environment, making sure that both parties understand their obligations and can resolve conflicts effectively.

The franchising code of conduct covers various aspects of the franchising relationship, including the disclosure of key information, the preparation and management of franchise agreements, and the resolution of conflicts. Franchisors are required to provide potential franchisees with a detailed disclosure document and a franchise agreement, which must be reviewed and signed before entering into a franchise arrangement. This disclosure document includes information about the franchise system, financial performance, and any relevant legal or operational matters.

The code requires that franchisors and franchisees act in good faith and engage in fair dealings. It sets out procedures for resolving conflicts, including negotiation, to make sure that issues can be addressed without the need of costly legal action. The code also requires franchisors to provide ongoing support and training to franchisees and to comply with standards related to marketing and advertising.

The code is enforced by the Australian Competition and Consumer Commission (ACCC), which monitors compliance and addresses breaches of the code to protect the integrity of the franchising sector.

Example of the franchising code of conduct

A new café franchisee in Melbourne receives a detailed disclosure document from the franchisor as required by the franchising code of conduct. This document includes critical information about the franchise system and financial performance. By reviewing this information, the franchisee makes an informed decision about the investment.

Once the franchisee opens the café, they benefit from ongoing support and training provided by the franchisor, making sure they comply with established standards and practices. If a conflict arises, the code’s provisions for negotiation and conflict resolution help the franchisee address issues efficiently without needing costly legal action.