{"id":4946,"date":"2021-09-15T10:18:55","date_gmt":"2021-09-15T00:18:55","guid":{"rendered":"https:\/\/www.coulterroache.com.au\/?p=4946"},"modified":"2021-10-14T15:46:02","modified_gmt":"2021-10-14T04:46:02","slug":"the-new-franchise-code-changes-and-what-you-need-to-know","status":"publish","type":"post","link":"https:\/\/www.coulterlegal.com.au\/the-new-franchise-code-changes-and-what-you-need-to-know\/","title":{"rendered":"Have you updated your disclosure document yet? The new franchise code changes and what you need to know."},"content":{"rendered":"

On 1 June 2021, the Australian Government made\u00a0long-awaited amendments to the Franchising Code of Conduct (Code<\/strong>) including changes to the Disclosure Document to be provided to franchisees.<\/p>\n

Franchise Agreements entered into, renewed or extended on 1 July 2021 will be required to comply with the amended Code.\u00a0However, some transition periods are different. Most of the regulations that change what\u2019s in the Disclosure Document will apply to Disclosure Documents to be given from 1 November 2021. This coincides with the time that many franchisors will be updating their Disclosure Documents for the end of the financial year (noting the requirement for Disclosure Documents to be updated within 4 months of the end of the franchisor\u2019s financial year). Those franchise systems that have a different financial year will still need to create a new Disclosure Document from 1 November 2021 to incorporate these changes.<\/p>\n

Given the above, all Franchisors must ensure that they have reviewed and updated their Disclosure Document to comply with the Code changes from 1 November 2021.<\/p>\n

Code changes and new information to be provided in the Disclosure Document <\/span><\/h2>\n

Post 1 November 2021, the Disclosure Document must include additional information that must be disclosed to franchisees or prospective franchisees. This information aims to support franchisees in accessing and evaluating commercial information in relation to the franchise system prior to entering into the Franchise Agreement. \u00a0In particular, additional disclosure is required in relation to:<\/p>\n

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  1. Capital expenditure<\/strong><\/li>\n<\/ol>\n

    If a franchisor discloses capital expenditure in a Disclosure Document, they must now include as much information as possible about such expenditure. In particular, the franchisor must include the reason for the expenditure; amount, timing and nature of the expenditure; anticipated outcomes and benefits of the expenditure and expected risks associated with the expenditure.<\/p>\n

    Before these amendments, a franchisor could make a franchisee take on significant capital expenditure on the basis that it was a necessary investment in the business. This is no longer permissible under the changes to the Code.<\/p>\n

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    1. Dispute resolution<\/strong><\/li>\n<\/ol>\n

      In addition to disclosing litigious disputes, franchisors now need to disclose the percentage of franchisees that participated in an alternative dispute resolution process (mediation or conciliation) or arbitration in the previous financial year and whether the disputes were initiated by the franchisor or one or more franchisees.<\/p>\n

      The Disclosure Document must also provide whether franchise agreement provides for arbitration of disputes in a manner consistent with Subdivision C of Division 3 of Part 4 of the Code.<\/p>\n

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      1. Restraint of trade <\/strong><\/li>\n<\/ol>\n

        A franchisor must now also disclose any restraint of trade clause or similar relating to periods after conclusion of the franchise agreement as a separate item of disclosure within the Disclosure Document.<\/p>\n

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        1. Goodwill <\/strong><\/li>\n<\/ol>\n

          The Disclosure Document must provide details of the franchisees\u2019 rights to any goodwill generated by the franchisee upon termination of the franchise agreement as a separate item of disclosure within the Disclosure Document.<\/p>\n

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          1. Rebates<\/strong><\/li>\n<\/ol>\n

            Franchisors need to disclose expanded details of any rebate or financial benefit which they might receive from a supplier in connection with the supply of goods or services to the franchisee including:<\/p>\n