One less document for franchisors to worry about is the Key Facts Sheet for prospective franchisees – this is no longer required.

The Treasury recently released a table of key changes to the 2024 Franchising Code of Conduct.

A key change with immediate effect is around restraints of trade in new, renewed or extended agreements issued on or after 1 April 2025.

Franchisors cannot include a restraint of trade clause for franchisees wanting to extend or renew an expiring agreements, and they may face civil penalties if these terms are included.

No changes are required to an existing agreement if it is not scheduled to transfer, extend or renew.

Not all elements of the Code will be enforced immediately; these include disclosure document obligations and compensation for certain instances of early termination.

There is a grace period of 1 November 2025 for full implementation of the Code.

The Australian Competition and Consumer Commission will enforce the remade Code and is expected to provide further guidance on its website.

This article originally appeared on the website of our sister publication, Franchise Executives.

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In particular, the ASBFEO will develop best practice guidance and education, improve the comparability and publication of franchising data sets, as well as the power to name and shame franchisors who have not participated meaningfully in alternative dispute resolutions.

The Ombudsman’s existing service that provides small businesses with low-cost legal advice about disputes with the Tax Office will also be expanded to cover initial advice about franchising disputes.

“These changes are a natural extension of our existing role and an opportunity to promote good behaviour and shared success in this dynamic sector of the economy by encouraging exemplar and best practice,” Ombudsman Bruce Billson said.

The decision comes in the wake of the Government’s acceptance of the recommendations put forward in the review of the Franchising Code of Conduct made by Dr Michael Schaper. The Government is set to amend legislation to provide ASBFEO with these new powers.

“We need to have the right balance between regulatory safeguards and conduct expectations for franchisees and franchisors while providing incentives for businesses to invest, develop, take risks, boost productivity, innovate and share success in franchise partnerships,” Billson said.

The Government is also set to expand ASBFEO’s Tax Concierge Service to support access to low-cost legal advice on alternative dispute resolution matters. It will also consider further changes as part of the independent statutory review of the ASBFEO dispute resolution services next year and establish a Treasury taskforce to conduct a cost-benefit analysis of introducing a licensing regime for the franchise sector.

“ASBFEO’s legislation requires a review at least every four years of the way that we operate our assistance function and whether the approaches, tools and resources available to us to resolve disputes are adequate or could be enhanced,” Billson explained. “The concept of a licensing regime is a bold suggestion for a franchise sector that is already more highly regulated here than in other comparable economies and ASBFEO looks forward to contributing to the feasibility work of the proposed taskforce.

“We believe there is scope in franchising for the Government to consider a non-regulatory approach to activating the existing option for parties to agree to arbitration under the Franchising Code of Conduct by urging franchise systems to pre-commit to binding arbitration where disputes cannot be resolved through alternative dispute resolution,” Billson added. “But there also needs to be more effective enforcement by regulators, such as the ACCC, of the Code and other legal protections that already exist, particularly around unfair conduct and anti-competitive behaviour.

The franchise sector is worth $135 billion and employs more than half a million people. There are some 70,700 franchisees in Australia and almost all of them are small businesses, as are some franchisors.

“Currently, it is only the well-resourced and patient that can further pursue their interests via existing legal channels, unless the regulator steps up and in. This can distort the bargaining position of the parties and willingness to find an early mediate resolution, and is why we advocate for a responsive, affordable and restorative Court-based mechanism that can ensure all parties can benefit from Code protections and legal provisions intended to support fair and reasonable commercial dealings,” Billson said.

“We believe that would be a game changer to deliver the Government’s objective to give people the confidence to enter business relationships and to invest, with the ‘bumper rails’ that aim to ensure reasonable dealing and fair commercial conduct being supported by an affordable and accessible legal process if it is required,” he concluded.

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“Dr Schaper has produced a well-researched and thoughtful report for the Australian Government and we support the report and the majority of his sensible recommendations to strengthen the Franchising Code and regulatory landscape for small and family businesses,” Billson said.

“The franchise sector is worth $135 billion and employs more than half a million people. There are some 70,700 franchisees in Australia and almost all of them are small businesses, as are many franchisors,” Billson added. “We need to have the right balance between regulatory safeguards and conduct expectations for franchisees and franchisors while providing for incentives for businesses to invest, develop, take risks, boost productivity, innovate and share success in franchise partnerships.”

Several of the recommendations involve the office of the Ombudsman, which Billson enthusiastically supported.

“We support the recommendation for a clear statement of purpose to be inserted into the Code to explicitly state why it exists and what it seeks to achieve,” Billson said. “Similarly, we back changes that would also provide a clear statement to prospective franchisees that while purchasing a franchise provides an opportunity to make a reasonable return, it does not guarantee a fixed rate of return. The statement would also outline other terms of their arrangement, so they have quality information to make an informed decision.”

Within the review Dr Schaper recommended that the ASBFEO, ACCC and other agencies develop best practice guides to improve standards of conduct in franchising.

“This is an opportunity to promote good behaviour and shared success and encourage exemplar and best practice,” Billson commented.

Schaper also recommended expanding ASBFEO’s powers to name franchisors who have not participated meaningfully in alternative dispute resolution.

“At present we can only use this power under our Act as it relates to general business disputes, rather than as part of obligations under the Code,” the ASBFEO explained. “These additional powers should apply to franchisees as well as franchisors.”

The review also recommended that the Government also investigate the feasibility of introducing a licensing regime to regulate most aspects of the franchisee-franchisor relationship better.

“We think the Government should analyse the costs and benefits of introducing a licensing regime to regulate the franchisee-franchisor relationship – noting that Australia’s franchising system is already highly regulated and the vast majority of franchise parties on both sides of the relationship are small, less well-resourced businesses,” Billson said. “In exploring whether there are advantages in introducing a licence system, it will be important to examine why existing safeguards and better franchising practice Code expectations are not always implemented.

“Lamentably, in many cases, not enough use is being made of existing powers to take action,” he added. “Small and family businesses are not easily able to enforce protections under the Franchising Code and hope and rely on the regulator to take action where they feel they have been infringed upon. 

“We encourage the Government to consider how a revised Code could be more effectively enforced. We have proposed the introduction a Federal Small Business and Codes List into the Federal Circuit and Family Court of Australia, to provide small businesses with an affordable and timely means of enforcing their legal rights,” Billson concluded.

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This national registry will require franchisors to lodge disclosure documentation about their franchise annually and shall be made publicly available so that prospective franchisees will be able to do vital due diligence before entering into a franchise agreement.

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson has welcomed the move, saying that there is a longstanding need for greater awareness among franchisees about the agreements they’re entering into, and that the registry will help improve confidence in the sector.

“My office has advocated strongly for the implementation of this registry to improve transparency of franchise operations, so prospective franchisees are properly informed before signing a franchise agreement,” Billson said. “Over the past six months, my office has fielded over 240 calls from franchisees seeking information regarding disputes under the Franchising Code of Conduct. This demonstrates just how critically important it is for prospective franchisees to know what they are getting into before signing a franchise agreement.”

The ASBFEO noted that the cost of purchasing and setting up a franchise can be very significant, so verifying with the registry, along with getting independent legal and business advice is necessary before making a substantial investment.

“Prospective franchisees need to ensure they are aware of a range of key ongoing costs associated with running the business such as wages, rent and inventory,” Billson said.

The Franchise Disclosure Registry is scheduled for release in early 2022. There will be a transition period to allow franchising businesses to understand the new requirements before the registry is mandated.

The ASBFEO stressed that assistance is available to anyone involved in a franchise dispute through calling his office on 1300 650 460 or emailing them at info@asbfeo.gov.au.

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