Most franchisors are complying with the July 2010 changes to the Franchising Code of Conduct but a minority need to improve their compliance levels, a new report reveals.

The Franchising Code of Conduct Changes Study, a supplement to the 10 Thousand Feet Franchisor Expansion Study, asked 81 franchisors to indicate their compliance to the latest changes to the Code. These changes were introduced to give franchisees better disclosure.

The study showed that more than 90 percent of franchisors reported to voluntarily be complying with many of the changes even before they took effect. Head of intelligence at 10 Thousand Feet Ian Krawitz said most franchisors are doing the right thing by their franchisees.

Ninety six percent said they inform franchisees of the need to return intellectual property at the end of the franchise agreement, and explain the rights and limitations of who franchisees can sell their business to.

Compliance in telling franchisees if a significant capital investment is required prior to renewing a franchise agreement was at 90 percent.

However, on the issue of letting prospective franchisees know how far in advance of the end of the franchise agreement formal talks will start in relation to renewal or termination of the franchise agreement, compliance dropped to 85 percent.

And only 77 percent of franchisors said they informed prospective franchisees of the franchisors’ right to make changes to elements of the franchise agreement during the term of the agreement without consent from franchisees. This includes changes to the operations manual, explaining the circumstances for unilaterally varying the franchise agreement in the past and the situations in which it might change in the future.

The 2010 Franchisor Expansion Study also shows that in the past three years one in two of AustraliaÕs franchisors had been involved in a formal dispute with a franchisee (58 percent), 34 percent had disputes that went to mediation and 17 percent had disputes that ended in court.

Statistics from one of the studyÕs legal sponsors, DLA Phillips Fox, highlighted that the vast majority of disputes were raised by franchisees.

* The Franchisor Expansion Study launched in 2007 to help Australian Franchisors improve franchise recruitment practices and improve the relationship with their existing franchisees. Now into its third edition, the 2010 Franchisor Expansion Study was conducted via surveying 81 franchisors with data collection completed over four months starting on March 16, 2010.