Understanding the Franchising Code of Conduct

The Current Code

The Code is made under Part IVB of the Competition and Consumer Act 2010 (Cth), which gives industry codes prescribed by regulation the force of law. The 2025 Code is administered and enforced by the Australian Competition and Consumer Commission (ACCC). Contraventions of designated provisions can attract civil penalties, and the ACCC may seek injunctions, compensation orders and other remedies under Part IVB. Private rights of action under Part IVB, contractual remedies and Australian Consumer Law claims (including for misleading or deceptive conduct and unconscionable conduct) remain separately available.

The Code operates alongside the general law of contract, the Australian Consumer Law (including the small business unfair contract terms regime), the Personal Property Securities Act 2009 (Cth) where security interests are granted, and State-based regimes such as retail leases legislation where a franchised business occupies retail premises. It does not displace those regimes; a franchise relationship typically engages several of them at once.

Application and Transition

The Code applies to a "franchise agreement" as defined in the Code. The definition looks to substance rather than label: a franchise typically exists where a franchisor grants a franchisee the right to carry on a business supplying goods or services under a system or marketing plan substantially determined, controlled or suggested by the franchisor, in association with a trade mark, advertising or commercial symbol owned or licensed by the franchisor or an associate, in return for payment. Labelling an arrangement a licence, distribution or agency agreement does not exclude the Code if the substance is a franchise.

From 1 April 2025 the 2025 Code applies to franchise agreements generally. Under the transitional provisions in ss 97–98 of the 2024 Regulations, the new instrument applies to franchise agreements that are entered into, transferred, renewed or extended on or after 1 April 2025. For an agreement that existed immediately before 1 April 2025, the old Regulations continue to apply until the agreement terminates or ceases, or is transferred, renewed or extended, at which point the new Code applies in full. Ordinary variations of a pre-commencement agreement do not, of themselves, cross the transition boundary. Conduct occurring before 1 April 2025 continues to be tested against the old Code. Neither party should assume that obligations under the old and new Codes are identical.

The 2025 Code continues to include specific provisions for new-vehicle dealership agreements, including additional rules on compensation for early termination and reasonable opportunity for return on investment. Section 10 of the Code generally excludes an agreement to which another mandatory industry code applies, with the Food and Grocery Code and the Unit Pricing Code expressly preserved. Where an agreement is one to which the separate Oilcode — made under the Competition and Consumer (Industry Codes—Oilcode) Regulations 2017 (Cth) — applies as a mandatory code, that agreement is regulated by the Oilcode rather than the Franchising Code. A particular arrangement should be tested against the terms of s 10 rather than assumed to fall outside the Franchising Code because it involves fuel supply.

Pre-Entry Disclosure

The disclosure regime is the backbone of the Code and runs in three stages.

Information statement. As soon as practicable after a person formally applies or expresses interest in acquiring a franchised business, the franchisor must give that person the information statement in the form set out in the Code. It is a short plain-English document warning of the key risks and directing the prospective franchisee to obtain independent legal, accounting and business advice.

Disclosure document, agreement and Code. At least 14 days before a prospective franchisee enters a new franchise agreement, renews or extends an agreement, extends its scope, or makes any non-refundable payment under it, the franchisor must give the prospective franchisee:

• a current disclosure document in the form and with the content prescribed by the Code, updated within the statutory update window and covering the franchisor's business, key personnel, existing and former franchisees, establishment and ongoing costs, supply arrangements and rebates, intellectual property, marketing and cooperative fund contributions and administration, materially relevant facts, litigation and past disputes, and specified financial information or auditor's reports;
• the franchise agreement in the form in which it is to be executed; and
• a copy of the Code itself.

The 14-day disclosure period applies to new agreements and to renewals and extensions. It does not apply to a transfer of an existing agreement, which is regulated by the separate consent process discussed below. The Code also requires the franchisor to notify the franchisee of materially relevant facts arising after disclosure (including changes in ownership, litigation and solvency) within a short prescribed period.

Marketing and cooperative funds. Where a marketing or cooperative fund is maintained, the franchisor must give annual financial statements prepared in accordance with the Code and, unless the franchisees vote otherwise in the manner permitted by the Code, an auditor's report on those statements. The franchisor must administer the fund in accordance with the Code and the agreement; franchisees do not own the fund and do not have a general right to direct expenditure, but the franchisor must expend the fund consistently with the disclosed purposes and account for it.

Earnings information. The Code does not require a franchisor to give earnings projections. If earnings information is given, it must have a reasonable basis and comply with the misleading conduct and consumer protection provisions of the Australian Consumer Law. Verbal forecasts of turnover or profit that are not reflected in the disclosure document should be treated with substantial scepticism.

Franchise Disclosure Register. Franchisors are required to register on the Franchise Disclosure Register maintained by the Commonwealth Treasury. Since 1 April 2025 the Register may contain only two documents in respect of a franchisor: the standard-form franchise agreement and the franchisor's logo. Key facts sheets and disclosure documents can no longer be uploaded to or displayed on the Register. Initial information must generally be provided on the Register at least 14 days before entry into a franchise agreement in the circumstances specified by s 92, and under s 93 the franchisor must confirm or update its Register information annually. The Register does not replace the disclosure document that must be given directly to a prospective franchisee under the Code.

Statutory disclosure is not a substitute for legal, accounting and business due diligence. The Code requires the franchisee to acknowledge that they have had a reasonable opportunity to obtain independent advice, but taking that opportunity is the franchisee's responsibility.

The Franchise Agreement

The franchise agreement is the central commercial document. It typically addresses the term, renewal rights, territory and any exclusivity, online sales, fees and royalties, marketing contributions, supply arrangements and approved suppliers, rebates, training and operations, performance criteria and audit rights, intellectual property and post-term use, restraints of trade, premises and lease arrangements (including any franchisor-associated landlord), guarantees, security interests and PPSA registrations, transfer, and termination.

The Code imposes specific limits on what a franchise agreement can validly contain — for example, constraints on general releases, on restraints of trade following non-renewal, on jurisdiction and choice-of-law clauses that would take a dispute outside Australia, on waiver of Code rights, and on requirements to incur significant capital expenditure that were not properly disclosed or otherwise justified. Together, the agreement, disclosure document, operations manual, lease, guarantees and PPSA arrangements can amount to a very substantial long-term commitment; none of them should be signed without specialist legal review.

Good Faith

The Code imposes a mutual obligation on the parties to act towards each other in good faith. Consistent with the general law, relevant factors include acting honestly and not arbitrarily and having regard to the other party's legitimate interests. Good faith does not:

• create a fiduciary duty between franchisor and franchisee;
• require a party to act against its legitimate commercial interests; or
• guarantee renewal, extension, transfer approval or any particular commercial outcome.

What it does do is regulate the manner in which commercial interests are pursued — for example, when withholding consent, exercising a discretion or enforcing rights. The obligation cannot be contracted out of, limited or excluded, and it applies throughout the relationship including pre-contract negotiations, renewal, dispute resolution and termination. Breach can attract civil penalties and give rise to remedies under Part IVB of the Competition and Consumer Act; conduct in trade or commerce can also engage the misleading conduct and unconscionable conduct prohibitions in the Australian Consumer Law.

Cooling-Off

The Code contains two distinct cooling-off rights, and they should not be conflated.

New franchise agreements — s 50. A franchisee may terminate a new franchise agreement by written notice within 14 days after entering into the agreement. Section 50(7) contains a limited franchisee election to opt out by written notice where the franchisee has, or recently had, another substantially identical franchise agreement with the franchisor and the franchised business is substantially the same. In the circumstances specified by s 50(2)–(4), including receipt of lease or occupancy terms and, in specified cases, entry into the lease or grant of occupancy, s 50 gives separate additional 14-day windows. Section 50(6) expressly excludes renewals and extensions of an existing franchise agreement from the s 50 cooling-off right.

Transfers without a new agreement — s 52. For a transfer of an existing franchise agreement that does not involve entering a new franchise agreement, the new franchisee may terminate by written notice given before the earlier of (a) the end of 14 days starting on the day after the new franchisee becomes the franchisee, and (b) the day on which possession and control of the franchised business are taken.

The repayment consequences differ. Under s 51, for an s 50 termination, the franchisor must repay payments made to it, less permitted reasonable expenses. Under s 53, for an s 52 transfer termination, the old franchisee must repay payments made to the old franchisee under the transfer agreement, less permitted reasonable expenses. Cooling-off is a distinct statutory right; it is not termination for breach and it is not the s 57 or s 58 termination rights for insolvency, fraud, abandonment or endangerment. Anyone considering exercising it should obtain advice immediately and give notice in writing within the applicable window.

Termination

Sections 55–59 of the Code set out separate franchisor termination pathways. The requirements differ depending on the ground.

Breach that can reasonably be remedied — s 55. Where the franchisor proposes to terminate for a breach that can be remedied, it must give the franchisee written notice stating that termination is proposed, specifying the breach, telling the franchisee what is required to remedy the breach, and allowing a reasonable time to remedy. The Code provides that this period need not exceed 30 days.

Early termination under the agreement (no breach) — s 56. Where the franchisor exercises a contractual right to terminate early in circumstances that do not involve breach by the franchisee, s 56 requires the franchisor to give reasonable written notice and written reasons. A generic contractual right to terminate at will does not displace this obligation.

Specified grounds on 7 days' notice — s 57. The franchisor may terminate on 7 days' written notice where the franchisee no longer holds a licence required to operate the franchised business, becomes insolvent (or, for a body corporate, is subject to a specified insolvency event or deregistration), or where a specified court order or conviction ground listed in s 57 applies. Section 451E of the Corporations Act 2001 (Cth) may affect the franchisor's ability to rely on insolvency grounds against a corporate franchisee, and legal advice should be obtained before relying on s 57 in an insolvency scenario.

Abandonment, endangerment and fraud — s 58. Where the ground is abandonment of the franchised business, danger to public health or safety, or fraud in connection with the franchised business, s 58 requires the franchisor first to give a proposed termination notice. The franchisee then has 7 days to give a written dispute notice. If the franchisee gives a dispute notice, termination is stayed until 28 days after that notice, and the Code's detailed proposal-and-response process must be followed. The franchisor cannot circumvent this process by re-labelling the ground as an "agreed serious-breach category".

Termination by the franchisee. A franchisee retains contractual and statutory termination rights where the agreement or the general law permits, and may invoke the Code's dispute resolution and cooling-off provisions where applicable. Section 54 provides a separate process where a franchisee proposes to terminate the agreement by written notice with reasons, and the franchisor must respond within 28 days.

Termination does not automatically extinguish accrued liabilities, release personal guarantees, refund establishment costs, discharge PPSA-registered security or extinguish restraint of trade clauses. Those consequences depend on the agreement, the general law and the Code's compensation and return-on-investment provisions.

End of Term and Restraints

The 2025 Code contains a formal end-of-term notification regime. The franchisor must give written notice of its intention to renew, extend or enter a new agreement, or not to do so, at least 6 months before the end of the term (or at least 1 month before the end of the term for agreements of 12 months or less). Where the franchisor decides not to renew or extend, the franchisee is generally entitled to a statement of reasons on request.

Section 42 of the Code prohibits enforcement of a restraint-of-trade clause against a former franchisee at the end of the term where each of the conjunctive statutory conditions is met. In summary, the s 42 conditions require that:

• the franchisee, before the end of the term, gave the franchisor written notice that it wanted to enter into a new franchise agreement or extend the agreement on substantially the same terms as the current agreement;
• the franchisee satisfied any conditions the franchise agreement specified for renewal or extension;
• the franchisee did not seriously breach the franchise agreement, and did not infringe the franchisor's intellectual property or breach an obligation of confidence to the franchisor;
• the franchisor did not agree to a new agreement or extension; and
• the franchisee was not given genuine compensation for goodwill in accordance with the agreement.

The Code does not, however, void every restraint. Where the conditions above are not satisfied, a restraint may still be enforceable in accordance with its terms, subject to the general law of restraint of trade and (in New South Wales) the Restraints of Trade Act 1976 (NSW). Requirements for the franchisee to incur significant capital expenditure are constrained by the Code and generally must have been disclosed, agreed after the agreement is entered into, or otherwise justified in one of the ways the Code permits.

Transfers

Under ss 48–49 of the Code, a franchisee proposing to transfer the franchise makes a written request for the franchisor's consent and must include all information the franchisor reasonably requires to decide the request. The franchisor is deemed to have consented if it does not notify the franchisee of a refusal of consent within 42 days of the later of the date the request was made and the date on which the franchisee provided the last further information reasonably sought by the franchisor. Consent may be revoked within 14 days after it is given, but not unreasonably.

The franchisor may refuse consent only on grounds set out in the Code, including that the proposed transferee is unlikely to be able to meet the financial obligations that the franchise agreement will require, is unlikely to meet reasonable business requirements of the franchise, does not meet reasonable requirements relating to skills, business experience or references specified by the franchisor, or is likely to be an unsuitable franchisee for other stated reasons in the Code. A purported information demand that is not authorised by the Code, or a refusal to consent on grounds outside the Code, may be a breach.

The ss 48–49 consent process for a franchisee's proposed transfer is separate from s 54, which regulates a franchisee's proposal to terminate the agreement by giving the franchisor written notice with reasons. Section 54 requires the franchisor to respond in writing within 28 days. That 28-day period should not be confused with the 42-day transfer-consent period.

A transfer under ss 48–49 is different from entering a replacement franchise agreement. Where the parties instead sign a new agreement, the full 14-day disclosure period and the s 50 cooling-off regime apply. Legal costs and transfer fees are recoverable by the franchisor only where the agreement authorises them and they have been disclosed; they are not automatically recoverable.

Dispute Resolution

The Code sets out a structured process:

• the complainant gives written notice of dispute describing the dispute, the outcome sought and the action required to resolve it;
• the parties then attempt in good faith to resolve the dispute themselves within the timeframe set by the Code;
• if unresolved, either party may refer the dispute to mediation or, if the parties agree, conciliation. The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) can assist with dispute-management information and appoint an ADR practitioner. ASBFEO is not a court and does not decide the merits;
• the 2025 Code introduces a multi-franchisee dispute procedure allowing two or more franchisees with substantially similar disputes to combine their dispute-resolution processes, with the franchisor required to participate; and
• arbitration is available only where both parties agree in writing at the relevant time. Court proceedings, ACCC enforcement, ACL claims and contractual remedies remain separately available and are not displaced by the Code's process.

Key 2025 Reforms

The 2025 Code introduced or strengthened a number of features that need to be understood in any franchising engagement:

• Compensation for early termination. Franchise agreements must contain terms providing for compensation to the franchisee where the franchisor terminates the agreement early in specified circumstances, such as where the franchisor withdraws from the Australian market or ceases to supply goods or services essential to the franchise.
• Reasonable opportunity for return on investment. The agreement must give the franchisee a reasonable opportunity to make a return on any investment required by the franchisor as part of entering into or continuing the agreement. This is an opportunity, not a guarantee of profit, resale value, renewal or return of capital.
• Restraint of trade constraints. As described above, restraint clauses are unenforceable against a former franchisee following non-renewal where the Code's conditions are satisfied.
• Civil-penalty coverage. The Code substantially expanded civil-penalty coverage compared with the 2014 Regulation. Section 17 of the Code sets the higher maximum penalty formula — the greater of $10 million, three times the value of the benefit obtained, or 10% of adjusted turnover in the preceding 12 months — but that formula applies only to the provisions listed in s 17, namely s 34(1) and (2), s 45(2), (3) and (5), s 46(2) and s 64. Many other civil-penalty provisions in the Code carry a maximum of 600 penalty units. The overall Competition and Consumer Act 2010 (Cth) framework in s 76 is not applied generically to every Code obligation. Current penalty-unit and turnover-based amounts should be checked against the statute before quoting a dollar figure.
• Multi-franchisee disputes. Franchisees with common issues can bring combined disputes, and the franchisor must participate.
• Unfair contract terms interaction. Standard-form franchise agreements with small-business franchisees remain subject to the unfair contract terms regime in the Australian Consumer Law, which applies in addition to the Code.

Risks for Franchisees

• Signing before disclosure has been carefully considered and independent advice obtained.
• Relying on verbal forecasts of turnover or profit not reflected in the disclosure document and without a reasonable basis.
• Underestimating ongoing fees, marketing fund contributions, refurbishment costs, technology upgrades and end-of-term costs.
• Signing personal guarantees, leases and PPSA collateral arrangements that survive the end of the franchise.
• Restraint of trade clauses whose enforceability at exit depends on the interaction of the Code, the general law and any State restraint legislation.
• Supply-chain dependence, mandatory purchasing arrangements and rebate structures that affect margins.
• Inadequate exit and transfer planning, particularly where there is no clear succession or buyer.
• Assuming that the previous Code, older templates or pre-2025 advice remains current.

Risks for Franchisors

• Disclosure documents that are out of date, incomplete or inconsistent with the agreement, or that fail to capture the 2025 Code's expanded content requirements.
• Marketing fund administration, financial reporting and audit failures.
• Termination, renewal and transfer decisions made without careful regard to the Code's expanded civil-penalty coverage.
• Purporting to terminate under s 57 or s 58 without following the specific notice, timing and dispute procedures the Code requires for those grounds.
• Insufficient written records of consent, variations, materially relevant fact notifications and disputes.
• Conduct in negotiations or enforcement that exposes the franchisor to good faith, misleading conduct or unconscionable conduct claims.
• Franchise Disclosure Register information that is out of date, incomplete or inconsistent with the current disclosure document.
• Standard-form agreements that engage the unfair contract terms regime without being reviewed against the current thresholds.

Why Legal Advice Matters Before Signing

A franchise agreement is often the largest single commercial commitment a small-business owner ever makes. Equally, for a franchisor, the network is only as robust as the agreements, disclosure and compliance underpinning it. Getting the legal foundations right at the start — against the 2025 Code rather than a stale template — is materially cheaper than fixing them under dispute.

Parke Lawyers advises both franchisees and franchisors across Victoria — from reviewing disclosure and agreements before signing, to advising on renewals, transfers, terminations, disputes and exits. See our Commercial & Business Law service for the broader practice, and our companion article on business succession planning for how a franchise interest sits within a wider succession strategy.

Frequently Asked Questions