Key Updates to the Franchising Code of Conduct You Need to Know

The Franchising Code of Conduct has undergone significant changes, and it’s crucial for small business owners in the franchise sector to stay informed. These updates aim to simplify franchise agreements, improve the relationship between franchisors and franchisees, and offer better protections. Here’s what you need to know about the new rules and how they could impact your business.

Franchising in Australia involves more than 1,100 franchisors and over 70,000 franchisees, many of which are small businesses. If you’re involved in the franchise sector as either a franchisor or a franchisee, it’s essential to familiarize yourself with the recent changes to the Franchising Code of Conduct. These changes are now in effect and will continue to roll out over the coming months.

Overview of Changes to the Franchising Code of Conduct

The Franchising Code of Conduct was recently reviewed to assess the journey of franchisors and franchisees—from entering an agreement to its conclusion. Based on this review, a series of changes are being phased in, with some already implemented and others scheduled for later in 2025.

For franchisees, franchising is often an attractive way to grow a business by leveraging an established brand. Keeping up with updates to the Franchising Code of Conduct and understanding the terms of your franchise agreements is crucial to protecting your interests.

The updated Code aims to create clearer rules for franchise agreements, improve the process for joining and renewing agreements, expedite responses to serious misconduct, and enhance protections for franchisees. It also introduces new measures to encourage positive behaviour in franchising relationships.

Key Changes Effective from 1 April 2025

The following updates have already come into effect:

• Civil Penalties for Non-Compliance: Franchisors who include prohibited terms in agreements, fail to provide required information, or neglect their responsibilities will face civil penalties.
• Restraint of Trade Clauses: These clauses can no longer be included in certain circumstances, especially when a franchisee is renewing or extending their agreement.
• Faster Termination for Serious Misconduct: If a franchisee is found guilty of serious misconduct, the termination period is now reduced to seven days.
• Opt-Out Provisions: Franchisees renewing an agreement with similar terms can now opt out of the disclosure requirements and the mandatory 14-day cooling-off period.
• Name and Shame Mechanism: The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) can now publicly name franchisors who refuse to engage in dispute resolution processes or withdraw from them.

These are just a few of the updates. For a more detailed explanation, refer to additional resources on the key changes.

What’s Coming on 1 November 2025

A second wave of changes will take effect from November 2025. These are designed to make franchise agreements fairer and more manageable for both franchisors and franchisees.

• Disclosure Requirements: Franchisors will be required to provide new disclosures regarding significant capital expenditure. Additional documentation will also be necessary when franchisees contribute to a specific-purpose fund.
• Franchisees’ Right to a Reasonable Return: Franchise agreements will need to ensure that franchisees have a fair opportunity to earn a return on their investment. Compensation will also be required in cases of early termination under specific circumstances.

These upcoming changes will further strengthen the franchising landscape, making it more transparent and equitable.

For Franchisors: What You Need to Know

If you’re a franchisor, it’s important to stay up to date with these changes, both those that are already in place and those coming in November. You’ll need to update your disclosure documents and ensure they comply with the new requirements. For instance, new fields will need to be completed in your franchisor profile, and you will no longer be required to provide a separate Key Facts Sheet for prospective franchisees, as this information will now be included in your disclosure documents.

Now is a good time to review your franchise agreements and seek professional advice to ensure that your business is fully compliant with the updated Code. This proactive approach will help you avoid any complications down the line and maintain a positive relationship with your franchisees.