New Franchising Code available just eight weeks prior to commencement

New Franchising Code available just eight weeks prior to commencement

The new Franchising Code of Conduct, due to commence on January 1 next year, is now publicly available but has not yet been formally announced by Small Business Minister Bruce Billson despite taking effect in less than eight weeks’ time.

The code was posted on the federal government’s ComLaw website on November 3, and is freely available for download.

The 77-page code and 99-page explanatory statement are both available in PDF and Microsoft Word format and will be keenly downloaded and read by franchisors and legal advisors who have been starved of detail about its contents since the initial draft was released in April.

The release of the final version after such an extended delay since the release of the first draft leaves the franchise sector with barely eight weeks, including Christmas, to review and update their franchise agreements and review their business processes to ensure compliance before a new penalty system takes effect.

The final version contains essentially the same major elements of the previously-released draft in relation to the introduction of fines and penalties of up to $51,000 for breaches of the code, as well as an obligation to act in good faith and other reforms. However, key differences include the removal from the earlier draft of the ability for parties to provide notices electronically, the removal of disclosure of lease incentives from the disclosure document to a separate leasing document, and the failure of the new code to apply to agreements entered into prior to October 1, 1998.

Despite a short appearance at the Franchise Council of Australia’s national convention recently, Small Business Minister Bruce Billson has not formally announced the release of the new Code, but is likely to do so in an upcoming sitting of federal parliament.

News of the new code’s availability seeped out following its approval by the Governor-General and subsequent posting on the ComLaw website. Franchisors will need to move quickly to review their franchise agreements to comply with the new code by the required start date.

However, disclosure documents updated under the current Franchising Code of Conduct will remain valid until October 31, 2015 for those systems which operate on a June 30 financial year under transition arrangements to ease the compliance burden on franchisors, according to the Small Business Minister.

In a brief announcement at the Franchise Council of Australia’s national convention before the new code became public, the Minister acknowledged that while there was some concern about the looming commencement time frame of January 1, he announced that franchisors will be able to continue to use their disclosure documents under the existing code until October next year.

Franchisors who operate on a different financial year, such as those owned by an international parent, have no corresponding grace period, meaning franchisors with a December 31 year end will be expected to have disclosure documents that comply with the new Franchising Code of Conduct from January 1, 2015.

The franchise sector’s representative body, the Franchise Council of Australia will conduct seminars in most mainland capital cities from November 17 to explain the implications of the new Code to the franchise community.

Download the new Franchising Code of Conduct here

Read transcript of the Small Business Minister’s franchise convention speech

Jason Gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for 20 years at franchisee, franchisor and advisor level.

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