The Franchising Code of Conduct (The Code) is the foundation of Australia’s highly regulated franchising sector – and one of the most important documents for a franchisee. Here are five things you need to know about it. 

1. It governs the ongoing franchisee/franchisor relationship

The document outlines the rights and responsibilities of the franchisee investing in the business, and the franchisor, who runs the franchise system. In many ways, the Code works primarily for the benefit of franchisees.

2. Requires the franchisee and franchisor to act in good faith

In January 2015, the Code introduced an obligation under the Code for the franchisee and franchisor to act in good faith in their combined dealings. This obligation is required during the entire franchise relationship from the negotiation stage to the termination of the agreement.

3. Financial penalties and infringement notices apply for non-compliance

The Code also includes fines and infringement notices for serious breaches of the Code, and can be investigated by the Australian Competition and Consumer Commission.

4. Franchisors must be transparent

The document requires greater financial transparency from the franchisor about marketing and advertising, as well as a clarity over franchisor/franchisee e-retailing.

5. Franchisees aren’t protected from all risks

Yes, the Code is designed to protect franchisees overall, but there are some ways it cannot help franchisees.

These include:

• If a franchisee fails to undergo effective due diligence
• Whether a franchisor offers a minimum term or option to renew or extend
• A franchisee does not investigate the scope of an offered territory
• The fees a franchisor can charge a franchisee; the document does not dictate this
• A franchisee terminating an agreement after the cooling off period