Preliminary summary of the Independent Review of the Franchising Code of Conduct (“Review”)

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BDC Partners franchise code of conduct review

On 8 February 2024, the Minister for Small Business, the Hon Julie Collins MP, released the
anticipated Independent Review of the Franchising Code of Conduct (“Code”). As the Code is due to
sunset in April 2025, it is timely that the government and stakeholders in the industry have the
opportunity to assess the lay of the land and gauge what should be done (or not done) going
forward in the franchising space.

The review, which was undertaken by Dr Michael Schaper, puts forward 23 recommendations and
34 implementation suggestions for the Albanese Government to consider with respect to the
franchising sector. These proposals have been put together following the consideration of 95 formal
submissions and the undertaking of two surveys, one by the franchisees and another in relation to
the recently implemented Franchise Disclosure Register (FDR).

As this report has just been released, we provide a brief outline of what we consider to be the key
findings and recommendations contained in the review:

  1. Scope and Structure of the Code

    Overall, it was found that Code is generally fit for purpose and that it is recommended that it
    should be remade, largely in its current format. That being said, there is still a degree of
    confusion in the industry, predominantly by franchisees, as to what the Code is meant to
    achieve and that a clear statement of purpose should be inserted into the Code.
    It was also noted that the Code has been heavily reviewed in recent times and that the
    sector requires some respite from constant review. As a result, it was recommended that a 5
    year review cycle should be implemented.
  2. Entering into a franchise agreement

    It was found the disclosure process can be burdensome for franchisors to comply with, and
    burdensome for franchisees to comprehend and effectively act on. Therefore, it has been
    recommended that there is the need to simplify and consolidate disclosure information
    required to be provided prior to the entering into a franchise agreement (i.e. merging the
    disclosure document and key facts sheet).

    It was recommended that that disclosure and cooling off rights and protections for existing
    franchisees should be optional at the time of the renewal, as such requirements have been
    widely viewed as ‘unnecessary regulatory burdens’.

    It was also proposed that the provisions that currently only apply to new vehicle dealerships
    (i.e. franchise agreements must provide for compensation for early termination and must
    provide reasonable opportunity for return on franchisee’s investment) should apply to all
    franchise agreements.
  3. Regulatory oversight and dispute resolution

    Notably, but to no surprise, the Review provided discussion on the revamping of the
    regulatory framework in franchising, in particular regarding the prospect of a franchise
    licensing regime previously proposed by the ACCC. At this stage, the Review merely recommends that the government should investigate the feasibility of introducing a licencing regime to better regulate the franchisor-franchisee relationship, suggesting that the government, the ACCC and other stakeholders in the sector should continue to examine this framework.

    Additionally, the Review recommends that the scope of penalties under the Code should be increased. It was suggested that any obligations imposed by the Code and Division 5 of Part IVB of the Competition and Consumer Act 2010 (Cth) should be converted into penalty provisions, meaning any non-compliance by a franchisor with any provision of the Code would attract financial penalties.

The above is our preliminary summary of the Review. Our team at BDC Law will dive deeper into the review and will be releasing a more in depth analysis in the coming week. For those who would like to view the whole report, it can be found on the Treasury website – Review of the Franchising Code of Conduct Final Report | Treasury.gov.au.

For any questions or queries please get in touch with:

Patrick McKinlay | Associate Lawyer
E: [email protected]
M: +61 405 313 026

Jane Garber-Rosenzweig | Managing Director BDC Law
E: [email protected]
M: +61 478 041 646

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