Franchisors beware: Changes to the Franchising Code of Conduct

On 1 April 2025, significant reforms to the Competition and Consumer (Industry Codes – Franchising) Regulations 2024 (Cth) (Franchising Code) came into effect. If you are involved in franchising in Australia, it is critical to understand how these changes impact your agreements and disclosure processes.

Overview

• Changes to the Franchising Code came into effect from 1 April 2025.
• The changes apply to franchise agreements entered into, renewed, extended, or transferred from 1 April 2025, which are subject to the Franchising Code.  The changes also govern related conduct, such as the provision of disclosure documents.
• Some obligations will be phased in, with full compliance required from 1 November 2025.

What changes apply from 1 April 2025?

• Franchise agreements entered into, transferred renewed or extended on or after 1 April 2025, and disclosure documents provided on or after 1 April 2025, must     comply with the updated Franchising Code.
• Franchise agreements must not include restraint of trade clauses that apply when a franchisee seeks to renew or extend an expired agreement.

• Annual updates to disclosure documents must now be completed within four months of the start of the franchisor’s financial year.
• Franchisors face increased civil penalties for non-compliance with the Franchising Code.

Further Obligations from 1 November 2025

Additional obligations apply at the end of the transition period, including that:

• franchisors must disclose in disclosure documents any significant capital expenditure which the franchisee will be required to undertake;
• franchisors must provide further information when franchisees pay into a specific purpose fund;
• franchise agreements must provide franchisees a reasonable opportunity to earn a return on their investment; and
• franchise agreements must include compensation mechanisms for early termination in certain cases.

Where the old regulations apply

The old regulations will continue to apply to:

• franchise agreements entered into before 1 April 2025, until the agreements are terminated, transferred, renewed or extended; and
• conduct relating to such agreements, even if that conduct is engaged in on or after 1 April 2025.

What Should Franchisors Do?

Franchisors should review existing franchise agreements and disclosure documents to identify those impacted by the changes taking effect on 1 April and 1 November 2025.

Franchisors should also prepare for increased disclosure obligations, and assess whether existing restraint of trade and termination clauses require amendment to comply with the updated Franchising Code.

How We Can Help

At Groom Kennedy, we are here to assist businesses in navigating the evolving landscape of franchising law.  Whether you are a franchisor or franchisee, our commercial law team provides strategic advice tailored to your industry and risk profile. If you are looking for a lawyer to help you understand these changes, please do not hesitate to contact us.  

This article includes general information only and is not specific to your situation. If you require assistance in relation to anything contained within this article, please contact us.

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