Franchising Code of Conduct Australia
Franchising Code of Conduct Australia: Legal Guide for Franchisors & Franchisees
Introduction
The Franchising Code of Conduct is a mandatory industry code regulating franchise relationships in Australia. It sets out legal obligations for franchisors and protections for franchisees, including disclosure requirements, cooling-off periods, dispute resolution procedures, and franchise agreement obligations.
Any business operating a franchise system in Australia must comply with the Code. Failure to do so can expose franchisors to disputes, regulatory action, financial penalties, and significant reputational damage.
For founders looking to franchise a business, or franchisees considering an opportunity, understanding the Franchising Code of Conduct is critical before entering into any franchise arrangement.
Table of Contents
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What Is the Franchising Code of Conduct?
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Who Does the Code Apply To?
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Key Obligations Under the Franchising Code
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Disclosure Document Requirements
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Franchise Agreement Requirements
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Good Faith Obligations
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Cooling-Off Periods
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Dispute Resolution Under the Code
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What Happens if You Breach the Code?
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Common Franchising Compliance Mistakes
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Franchise vs Licensing Arrangements
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Do You Need a Franchise Lawyer?
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Frequently Asked Questions
What Is the Franchising Code of Conduct?
The Franchising Code of Conduct is a mandatory industry code under the Competition and Consumer Act 2010 (Cth). It regulates the conduct of franchisors and franchisees operating in Australia.
The Code is enforced by the Australian Competition and Consumer Commission (ACCC) and establishes legal obligations relating to:
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Franchise disclosure
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Franchise agreements
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Good faith conduct
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Cooling-off rights
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Dispute resolution procedures
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Marketing fund obligations
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Termination and renewal processes
The purpose of the Code is to improve transparency and fairness within franchise systems.
Who Does the Franchising Code Apply To?
The Code generally applies to businesses operating under a franchise arrangement in Australia.
This includes:
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Franchisors
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Franchisees
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Master franchise arrangements
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Sub-franchise arrangements
Importantly, some licensing arrangements may still fall within the legal definition of a franchise under Australian law.
Many business owners incorrectly assume that calling an arrangement a “licence” avoids franchise regulation. In practice, the substance of the relationship is more important than the label used in the agreement.
Key Obligations Under the Franchising Code
The Code imposes several important obligations on franchisors before and during the franchise relationship.
Disclosure Requirements
Franchisors must provide prospective franchisees with:
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A disclosure document
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A copy of the franchise agreement
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A key facts sheet
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Information required under the Code
These documents must generally be provided at least 14 days before a franchise agreement is signed or non-refundable payments are made.
Disclosure obligations are designed to ensure franchisees understand:
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The franchise system
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Fees and costs
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Litigation history
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Existing franchise network information
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Key risks associated with the opportunity
Franchise Agreement Requirements
A franchise agreement sets out the legal relationship between the franchisor and franchisee.
The agreement commonly addresses:
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Franchise fees and royalties
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Territory rights
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Intellectual property use
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Operational requirements
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Training and support
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Renewal rights
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Termination provisions
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Restraint clauses
Poorly drafted franchise agreements are one of the most common causes of franchise disputes.
Good Faith Obligations
The Franchising Code requires parties to act in good faith in relation to franchise agreements and dealings.
Good faith obligations apply to:
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Negotiations
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Performance of agreements
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Dispute resolution processes
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Contract enforcement decisions
Conduct that may breach good faith obligations can include:
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Dishonest conduct
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Arbitrary decision-making
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Unreasonable withholding of approvals
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Conduct designed to undermine the franchise relationship
Cooling-Off Periods
Under the Code, franchisees are generally entitled to a cooling-off period after entering into a franchise agreement.
This allows franchisees to terminate the agreement within a specified period, subject to certain conditions.
Cooling-off rights are an important consumer protection mechanism within Australian franchise law.
Dispute Resolution Procedures
The Code establishes dispute resolution procedures designed to encourage early resolution of franchise disputes.
This may involve:
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Negotiation
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Mediation
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Alternative dispute resolution processes
Disputes commonly arise regarding:
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Operational compliance
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Territory issues
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Franchise fees
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Misrepresentation claims
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Termination disputes
What Happens if You Breach the Franchising Code?
Failure to comply with the Franchising Code can expose franchisors to serious consequences, including:
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ACCC investigations
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Financial penalties
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Litigation
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Franchise disputes
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Reputational damage
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Unenforceable contractual provisions
The ACCC actively monitors franchise compliance and has enforcement powers where franchisors fail to meet their obligations.
For growing franchise systems, compliance failures can materially impact expansion plans and network stability.
Common Franchising Compliance Mistakes
Many franchisors encounter legal issues because franchise systems are implemented before the underlying structure is properly developed.
Common mistakes include:
Franchising too early
Businesses without proven systems often struggle to maintain consistency across franchise locations.
Poor disclosure practices
Incomplete or outdated disclosure documents can create significant legal exposure.
Weak franchise agreements
Template agreements frequently fail to properly allocate risk or address operational realities.
Confusing licences with franchises
Some licensing arrangements unintentionally trigger franchise regulation.
Lack of operational systems
A franchise model requires documented processes that can be replicated across multiple operators.
Franchise vs Licensing Arrangements
One of the most misunderstood areas of franchise law is the distinction between a franchise and a licence arrangement.
A franchise arrangement typically involves:
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Use of a brand or trademark
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A system or marketing plan
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Ongoing operational control or assistance
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Fees paid by the operator
A licensing arrangement may involve brand usage only without the broader operational framework associated with franchising.
However, some licensing structures may still fall within the legal definition of a franchise under Australian law.
This distinction is critical because incorrectly structured arrangements can unintentionally trigger obligations under the Franchising Code.
Do You Need a Franchise Lawyer?
Franchising is one of the most legally regulated methods of business expansion in Australia.
Legal advice is important to:
For franchisees, legal advice can assist in understanding:
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Franchise agreement obligations
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Risk allocation
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Termination rights
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Financial and operational exposure
Speak With a Franchise Lawyer
Whether you are establishing a franchise network or reviewing a franchise opportunity, understanding your obligations under the Franchising Code of Conduct is essential.
Whelan Lawyers advises franchisors and franchisees on franchise structuring, compliance, franchise agreements, disclosure obligations, and dispute resolution across Australia.
Contact our team to speak with an experienced franchise lawyer.
Frequently Asked Questions
What is the Franchising Code of Conduct?
The Franchising Code of Conduct is a mandatory industry code regulating franchise relationships in Australia under the Competition and Consumer Act.
Is the Franchising Code mandatory?
Yes. Businesses operating franchise systems in Australia must comply with the Code.
Who enforces the Franchising Code?
The Australian Competition and Consumer Commission (ACCC) is responsible for enforcement.
What documents must franchisors provide?
Franchisors are generally required to provide:
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A disclosure document
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Franchise agreement
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Key facts sheet
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Supporting information required under the Code
What is the cooling-off period for franchises?
The Code provides franchisees with a cooling-off period after entering into certain franchise agreements.
Does the Code apply to licence agreements?
Potentially. Some licensing arrangements may legally fall within the definition of a franchise depending on the structure of the relationship.
