The Franchising Code of Conduct (FCC) is designed to regulate the conduct of participants in the franchising sector, including those who are considering buying a franchised business, those selling a franchised business and the ongoing franchisor/franchisee relationship.
Under the Code, the franchisor must provide a disclosure document to the franchisee at least 14 days before a franchisee enters into a franchise agreement; a franchise agreement is renewed or extended. Furthermore, this information needs to be available 14 days before a franchisee makes a non-refundable deposit.
The FCC is made under the Competition and Consumer Act 2010. Prospective or existing franchisees should talk to an experienced commercial lawyer for advice if they are unsure of their responsibilities or rights.
According to the Franchising Council of Australia, the disclosure document should contain a number of key pieces of information pertinent to the franchising agreement. The document should include, among others, details about:
- The franchise territory
- The franchisor and its owners
- The franchisor’s litigation history
- Trade mark, patents and copyrights
- Establishment costs and payments
- Financing arrangements
The disclosure document also includes a summary of the obligations of the franchisor and the franchisee, as well as information relating to extensions, terminations, mediation and other issues. However, the FCC only applies to franchise agreements. In order to be classified under this banner, the arrangement must meet certain criteria, such as:
- An oral, written or implied agreement must be in place
- The operation is associated with a trade mark, advertising or commercial symbol
- The franchisor controls the supply of goods or services under a system or a marketing plan and grants the franchisee a right to carry on a business in connection with such goods or services
- A fee must have been agreed or paid
Nevertheless, there are exceptions to the Code. As such, it’s always important for franchisees to discuss a franchising agreement with a commercial lawyer thoroughly before committing to the deal. Please contact our specialist franchising team to learn more.