On 8 February 2024, Dr Michael Schaeper reviewed the Franchising Code of Conduct (“Code”) and put forward his report (“Report”) to the Federal Government. The last review of the Code was undertaken by Mr Alan Wein in 2013. This review was aimed to take stock of the status of the franchise regime.
Dr Schaeper made several recommendations as follows:
➢ That the Code be reviewed and have a clear statement of purpose.
➢ The 2021 changes relating to termination under clause 29 of the Code be revisited and “best practice” guidance be given for franchisee initiated exit from a franchise to give effect to clause 26B of the Code.
➢ Due to confusion over what ‘good faith’ and ‘goodwill’ has meant under the Code issues persist around change management and marketing. Guidance should be given, and franchisors encouraged to consult franchisees regarding any major change to the business model during the term of the franchise agreement.
➢ Accessibility to knowledge and education will be centralised into a single government portal rather than being searched across the Australian Competition and Consumer Commission (“ACCC”), Australian Small Business and Family Enterprise Ombudsman (“ASBFEO”) and other government resources.
➢ Review and increase penalties for non-compliance with the Code.
➢ Giving the ASBFEO additional powers to name franchisors who have not participated meaningfully in alternative dispute resolution which would provide an incentive to franchisors to resolve disputes.
The Report acknowledged that the current disclosure requirements are a burden for franchisors and difficult for franchisees to comprehend and suggests that franchise agreements be more transparent and simplified. This is something that has been raised in every review undertaken but never really implemented. It was also something I raised with Alan Wein when he undertook his 2013 review namely that the disclosure document needed to be simplified.
Following Alan Wein’s review in 2021 the Government has in fact made things more complicated for franchisors and franchisees by introducing the requirement to upload a Key Fact Sheet with the ACCC, register their franchise system and adding further disclosure obligations in an already complicated disclosure document!
The Government has stated that it will carefully consider the findings and recommendations from the Review before making a response. A full copy of Dr Schaeper’s Report is available, click here to view.
Contact: Robert Toth | Special Counsel | Accredited Commercial Law and Franchise
Specialist | [email protected] | mobile – 0412 67 37 57