ALERT Franchisors: Franchising Code Updates & Franchisee Protections (2025 Updated)

On 1 June 2025, a major update to the Franchising Code of Conduct (Code) was passed by Parliament. The changes are designed to better balance the power dynamics between franchisors and franchisees by focusing on three main areas:

1. Dispute resolution
2. Pre-entry disclosure
3. Termination of the franchise agreement

In addition, there are several more minor changes on specific areas of the Code.

When Are These Changes Coming Into Force And How Will It Apply To My Franchise?

The changes to the new Code come into force on 1 July 2025.

All franchise agreements entered into after 1 July 2025 must comply with the updated Code.

For any existing franchise agreements, the new Code will automatically apply to all disputes and events occurring on or after 1 July 2025, overriding any conflicting provisions. There is no need to update your existing franchise agreements immediately, but it is wise to review them to ensure ongoing compliance. You may also wish to check our Legal Advice For Startups guide for additional insights on regulatory compliance.

As a franchisor, it is best practise to review and update any Disclosure Document and Franchise Agreements you have in place.

For example, under an existing franchise agreement, mediation might have been the only alternative means to resolve a dispute. Under the new Code, any dispute arising after 1 July 2025 can equally be referred to arbitration or conciliation, even if the current franchise agreement solely provides for mediation. This flexible approach ensures you can select the most effective method for dispute resolution, and you can learn more about your options by reading our Guide on Terminating A Franchise Agreement.

Dispute Resolution

The primary change in dispute resolution is the inclusion of arbitration and conciliation as additional forms of alternative dispute resolution (ADR).

Old Code

• Mediation was the only available ADR process.

New Code

• Mediation, conciliation and arbitration are now available ADR processes.
• Item 17 of the disclosure document has been amended to reflect this change.
• Clause 40B is new and explicitly allows franchisees with similar disputes to discuss the matter collectively to decide whether to resolve their disputes in the same manner.

Impact

• The Code now offers greater flexibility in selecting the ADR process best suited to resolve disputes.
• It allows parties to decide on an ADR process that works best for their situation.
• Franchisors can no longer rely on confidentiality provisions or other means to prevent franchisees from collectively addressing similar disputes.

Pre-Entry Disclosure

A new document – the “Key Facts Sheet” – has been introduced as a mandatory disclosure tool that must be provided to a prospective franchisee before entering into a franchise agreement. In addition, the changes focus on:

• Clarifying when documents must be provided;
• Additional disclosure obligations when the franchisor or its associate has an interest in a lease (whether as a landlord or tenant); and
• Providing further details on disputes, supplier rebates, end-of-agreement processes, and earnings information.

Key Facts Sheet

New Code:

• A new document called a “Key Facts Sheet” has been added as a mandatory part of the information that must be provided to the franchisee before finalising the franchise agreement.
• Similar to the disclosure document, clause 9A stipulates that the “Key Facts Sheet” is a standard form document and must be updated regularly.

Impact:

• This additional document enhances transparency by ensuring prospective franchisees receive comprehensive information before commitment.

Information Statement

Old Code:

• There was solely an obligation to provide the “Information Statement”.

New Code:

• Clause 11(3) now clarifies that the “Information Statement” must be provided before the franchise agreement and the disclosure document are presented to a potential franchisee.
• If the franchise premises are to be leased or licensed by the franchisee from the franchisor or its associate, Clause 9(e) now mandates that a copy of the lease and any associated State or Territory information statements be provided prior to entering into the franchise agreement.
• Franchisors must also provide a copy of this information within 7 days upon request (clause 13(2A)).

Impact:

• The process for issuing franchise documents must be updated to accommodate these enhanced disclosure obligations.
• It is imperative that the “Information Statement” is provided to potential franchisees as soon as possible.

• For clarity, these new disclosure obligations only apply if the premises are leased or licensed from the franchisor or its associate.
• With this additional disclosure requirement and the new termination rights discussed below, franchisors are less likely to use licence arrangements for premises. In cases where it is unavoidable, finalising leases before entering into a franchise agreement is advisable – see our Franchise Agreements page for further guidance.
• A franchisee acquiring a franchised business now benefits from the same extensive disclosure requirements as a new franchisee.

14 Days To Review Documents

Old Code:

• Franchise agreements could be transferred from the seller to the buyer without the franchisor providing additional disclosure, leaving the buyer reliant on documents from the seller.

New Code:

• Under Clause 9(2A), franchisors cannot consent to a transfer of a franchise unless the buyer is given a 14-day period to review all required documents prior to becoming a franchisee.
• For clarity, this new disclosure obligation applies only to transferred franchise agreements. If a new franchise agreement is being entered into, the buyer is considered a “new” franchisee and the standard disclosure process applies.

Impact:

• A franchisee purchasing a franchised business will now benefit from comprehensive disclosure requirements comparable to those afforded to a new franchisee.
• This update ensures that even in the sale of a franchise, the buyer receives the full 14-day disclosure period. Franchisors should ensure their internal processes for franchise sales are adjusted accordingly. Additionally, refer to our article on Terminating A Franchise Agreement for related cooling-off rights.

Printed Or Electronic Documents

New Code:

• Clause 9(2C) grants potential franchisees the right to request that franchisors provide mandatory franchise documents in printed, electronic, or both formats.

Impact:

• Franchisors should offer franchisees the choice of how they receive their documents, thereby enhancing accessibility and convenience.

Disclosure Of Percentage Engaged In Proceedings

Old Code:

• The requirement was limited to disclosing information on disputes that were in litigation.

New Code:

• A new item, 4.4, has been included in the disclosure document.
• Franchisors must now disclose the percentage of franchisees engaged in any mediation, arbitration, or conciliation proceedings.

Impact:

• This change offers franchisees a more comprehensive understanding of dispute resolution trends within the network.

Disclosure Of Details

Old Code:

• Franchisors were only required to disclose basic details of any rebate or financial benefit received from a supplier.

New Code:

• Item 10.1 of the disclosure document has been updated.
• Franchisors are now obligated to provide greater detail, including:
  • the nature of any rebate or financial benefit;
  • the amount received expressed as a percentage; and
  • if the rebate or benefit is shared with franchisees, the percentage shared and a description of each component.

Impact:

• This enhanced disclosure helps franchisees gain a clearer insight into any potential conflicts of interest among the franchisor, franchisee, and suppliers.
• It is essential for franchisors to have robust methods in place for calculating and distributing supplier rebates.

Disclosure Of Interest

New Code:

• Item 13.3 of the disclosure document now requires the franchisor or its associate to disclose any interest in a lease.

Impact:

• This update, similar to the changes in item 10.1, ensures franchisees are made aware of any potential conflicts of interest concerning the premises.

Details On End Of Franchise Agreement

New Code:

• Item 18 of the disclosure document has been updated to require franchisors to provide more substantive details on the procedures at the end of a franchise agreement.
• New items have been added relating to goodwill and restraints on trade.

Impact:

• Item 18 now offers a more comprehensive explanation of the end-of-term procedures for a franchise agreement.

Earnings Information

Old Code:

• Previously, earnings information could be provided separately from the disclosure document, although that was not the intended approach.

New Code:

• Earnings information can only be furnished if it is provided at the same time as the disclosure document or subsequently incorporated into it.
• When earnings information is provided, clause 9(4) resets the 14-day disclosure period.

Impact:

• This ensures that all earnings information is transparently included within the disclosure document.

Termination

The primary changes are as follows:

• The cooling off period has increased from 7 days to 14 days;
• Franchisees now have an explicit right to initiate termination negotiations for a franchise agreement; and
• Immediate termination now requires a 7-day notice period.

Cooling Off Period

Old Code:

• A cooling off period of 7 days was provided.

New Code:

• The updated Code mandates a cooling off period of 14 days.
• This period resets when the franchisee receives a copy of the lease and, if the premises are leased or licensed from the franchisor or its associate (clause 26(1)), the cooling off provision applies to the franchise agreement separately.
• The extension also applies to the sale of the franchised business when the existing franchise agreement is transferred (clause 26A).
• Clause 26B now grants franchisees the right to propose termination at any time, with the franchisor required to respond within 28 days.

Impact:

• The extended cooling off period ensures that all new disclosure obligations, including those for leased or licensed premises and franchise transfers, are thoroughly reviewed.
• This update clarifies that a transfer or sale will only proceed if the franchisee is accorded the full 14-day period, ensuring fairness for all parties. For further details, you might also visit our termination guide.

Right To Termination At Any Time

Old Code:

• Immediate termination was allowed under certain special circumstances.

New Code:

• Immediate termination is no longer permissible without notice. The franchisor must now provide a 7-day notice period to the franchisee.
• The franchisee may contest any proposed immediate termination and refer the matter to an ADR process.
• The franchisor may, however, require the franchisee to cease operating the franchised business during the 7-day notice period and, where applicable, for up to 28 days from the initiation of ADR.

Impact:

• This amendment provides franchisees with a mechanism to contest abrupt termination, fostering fair treatment under the Code.
• Although it is unclear how situations where ADR exceeds 28 days will be handled, the obligation of good faith should ensure resolution before termination is finalised.
• Franchisors should also ensure that franchise agreements include a provision requiring franchisees to cease trading during the applicable notice period.

Significant Capital Expenditure

Old Code:

• Significant capital expenditure was allowed if the franchisor deemed it necessary and justified it with a written statement.

New Code:

• This exception has been removed.
• Additional disclosure obligations now require franchisors to specifically discuss any potential significant capital expenditures in the disclosure document.

Impact:

• Franchisors must review and update their disclosure documents (particularly item 14) to clearly outline any potential significant capital expenditures.

Marketing Funds And Other Cooperative Funds

New Code:

• The updated Code clarifies that advertising is an integral component of marketing.
• The obligation to comply with the Code now extends to any party controlling a marketing or cooperative fund, not just the franchisor.
• Civil penalties have been introduced for the misuse of these funds.

Impact:

• These clarifications provide enhanced transparency on reporting obligations related to marketing and cooperative funds.
• Franchisors should review the allocation and use of marketing funds, and ensure all practices are detailed in the disclosure document.
• Strict compliance with these provisions helps maintain a transparent and accountable franchise network.

Franchisors’ Legal Costs

Old Code:

• Costs associated with issuing breach notices and renewal notices could be passed on to the franchisee.

New Code:

• Only the costs associated with preparing the franchise agreement and other related documents can be passed on to the franchisee, and these costs must be clearly disclosed and fixed.

Impact:

• Franchisors must ensure that legal costs for document preparation are transparent, thereby protecting potential franchisees.

Retrospective Changes To Franchise Agreements

New Code:

• The Code now explicitly states that any changes to a franchise agreement cannot be applied retrospectively.

Restraint Of Trade

Old Code:

• Clause 23 stipulated conditions under which a restraint of trade would not apply, including that the franchisee was not in breach of the franchise agreement.

New Code:

• The updated Code now requires that any breach justifying a restraint of trade be both serious and recent.

Impact:

• This change prevents franchisors from enforcing restraint of trade clauses on trivial or outdated breaches.

Franchising Resources

Laws around franchising are complex and require expert legal advice. We offer a range of resources to guide you through every stage of the franchising process, such as:

• Selling A Franchise
• What To Do At The End Of A Franchise
• Legal Documents You Need For Franchising
• Franchise Agreements
• What Fees The Franchisee Has To Pay
• Terminating A Franchise Agreement
• What To Do With A Bad Franchisee
• Franchisees’ Legal Obligations
• What Are Franchising Royalties?
• Franchise Grant Process

These updates represent a significant shift towards greater transparency and fairness in the franchising sector. As we move into 2025, it is vital for both franchisors and franchisees to review their documentation and operational practices to maintain full compliance with the latest legal requirements. For further guidance, explore our Business Set-Up Guides and our comprehensive Contract Resources for helpful tips on updating your documents.

Need Help?

All these changes can seem daunting, but we’re here to help!

If you are a franchisor or franchisee with questions about your business, our team of experienced lawyers is ready to answer queries such as:

• What changes do I need to make to my existing documents?
• What new terms should be included in my future franchise agreements?
• What rights do I have under the updated franchise agreement?
• Can I terminate my franchise agreement early?
• What legal costs are involved in preparing my franchise documents?

It is best practise to update your franchise agreements and disclosure documents to comply with the updated Franchising Code of Conduct. Get in touch with us at team@sprintlaw.com.au or on 1800 730 617 for more information or help updating your documents. We’re available anytime for a free, no-obligation chat.

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