Franchising Code of Conduct

The Franchising Code is a mandatory industry code under the Competition and Consumer Act. It sets rules for how franchisors and franchisees deal with each other before signing, during the relationship, at renewal, on transfer and when the arrangement ends.

For small businesses, this cuts both ways. If you are a franchisor, the Code is a compliance system you need to build into sales, onboarding, operations and renewal workflows. If you are a prospective franchisee, it is one of the main protections designed to help you understand what you are buying.

The disclosure document is meant to help a prospective franchisee understand the system before they commit. It should not be treated as a stale attachment or a sales brochure. It needs to reflect the franchise network, fees, payments, litigation, supplier arrangements, intellectual property, territories, online sales, specific purpose funds and other matters required by the Code.

The Code requires parties to act in good faith. In practice, this means franchisors should be careful about hardball conduct that may be commercially tempting but unfair in the context of the relationship: withholding key information, using disproportionate pressure, refusing to engage with genuine issues, or exercising contractual powers without regard to the Code.

Many franchise systems require franchisees to contribute to advertising or other specific purpose funds. The risk is not only whether the money was spent. It is whether franchisees receive meaningful information about how it was spent, when reports were prepared, and whether the fund was managed according to the Code and the franchise documents.