The Franchising Code of Conduct is a mandatory industry code of conduct aimed at informing franchisees of their rights and responsibilities before entry to the market. It also provides protection for all parties involved.
In effect since October 1, 1998, compliance is monitored and enforced by the Australian Competition and Consumer Commission (ACCC). The following is an overview of the code in detail:
- A business is considered as franchise and falls under ACCC control when: the franchisor grants the franchisee the right to do business in Australia in accordance with the guidelines set by the franchisor; the business involves the extensive use of trademark and other related intellectual properties owned by the franchisor and is licensed for use by the franchisee; a fee is involved for starting or continuing the business.
- Franchisors and master franchisees are required to provide a disclosure document and a finalized draft of the franchise agreement 14 days prior to the start of the business.
- A copy of any other agreements that the franchisee enters into in relation to the franchise agreement is to be provided by the franchisor.
- All other pertinent facts about the franchise agreement are to be disclosed.
- The franchisee must provide a signed statement that he or she has consulted with a lawyer, business professional, or accountant about the proposed agreement.
- Ample time must be given for any changes to the franchise agreement. Decisions to extend, continue, terminate, or modify the agreement requires certain grace periods.
- In case of bankruptcy, the franchisee is allowed to abruptly terminate the agreement. Under any other circumstances, the franchisor is required to allow a reasonable time, not exceeding 30 days, for the franchisee to resolve the matter.
- A franchisor cannot be released from general liability towards the franchisee.
- Any dispute resolution procedures stipulated in the franchise agreement must be in accordance with the dispute resolution scheme set by the code.
For clarifications on the code or any other concerns, the ACCC can be reached through their website: http://www.accc.gov.au/, www.accc.gov.au/franchising or contacted through the numbers: 1300 302 502 or 1300 302 021.