Significant changes to the Franchising Code of Conduct will take effect from April 1, 2025, following the release of the Competition and Consumer (Industry Codes — Franchising) Regulations 2024 on December 5, 2024 (New Code). These changes are designed to enhance fairness and transparency in the franchise industry and introduce new compliance requirements for franchisors.
If you’re a franchisor, now is the time to prepare for these regulatory updates to avoid legal risks and penalties.
Who Does the New Franchising Code Apply To?
The New Code applies to:
✅ All franchise agreements entered into, transferred, renewed, or extended on or after April 1, 2025.
✅ Conduct engaged in from April 1, 2025, onwards.
However, Sections 43 and 44 (which cover compensation for early termination and reasonable opportunity for return on investment) will only apply to franchise agreements entered into, transferred, renewed, or extended from November 1, 2025.
For existing agreements before April 1, 2025, the old Franchising Code remains in force until the agreement is terminated, expires, or is renewed/extended.
7 Key Changes Franchisors Must Know
1. Restraint of Trade Clauses
From April 1, 2025, franchisors cannot include restraint of trade clauses in franchise agreements under certain conditions, including when:
- The franchisee wants to renew or extend the agreement on the franchisor’s current terms.
- The franchisee has not breached the agreement or infringed on intellectual property rights.
- The agreement does not allow the franchisee to claim compensation for goodwill, or the compensation given is only nominal.
💡 Franchisors may respond by shifting to longer-term agreements (e.g., 10-year terms instead of 5+5-year terms) to avoid compliance risks.
2. Compensation for Early Termination
Franchise agreements must now include provisions for compensating franchisees when agreements are terminated early due to:
- The franchisor withdrawing from the Australian market.
- Rationalising its network in Australia.
- Changing its distribution model.
🔎 Franchisors must now budget for potential compensation payments when structuring their franchise model.
3. Reasonable Opportunity for Return on Investment
All franchise agreements must now provide franchisees with a reasonable opportunity to make a return on their investment.
- Franchisors must justify fees and financial projections.
- Franchise models may need adjustments to ensure profitability.
- This could make franchise structuring more complex and costly.
💡 Tip: Ensure all financial disclosures are accurate and transparent to comply with this requirement.
4. New Disclosure Document Requirements
From April 1, 2025, franchisors must update their disclosure documents to align with the New Code.
- The Key Facts Sheet will now be merged with the Disclosure Document for a streamlined pre-entry process.
- While this reduces paperwork, franchisors must ensure all disclosures are clear, accurate, and legally compliant to avoid penalties.
🔎 Action Item: Review and update your disclosure documents before issuing them after April 1, 2025.
5. Restrictions on Disclosure of Personal Information
Franchisors cannot disclose a former franchisee’s personal information unless:
✅ The franchisor notifies the former franchisee at least 14 days before disclosure.
✅ The franchisee does not request in writing that their information remain private.
💡 Franchisors should decide when to notify franchisees (e.g., upon exit or before updating disclosure documents).
6. Public Naming of Non-Compliant Franchisors
Franchisors that fail to engage meaningfully in dispute resolution may now be publicly named by the Australian Small Business and Family Enterprise Ombudsman.
⚠️ Reputational risk: Franchisors must participate seriously in dispute resolution to avoid being blacklisted.
7. Increased Penalties for Code Breaches
The New Code introduces higher penalties for non-compliance, with more breaches attracting financial consequences.
💡 Franchisors should review compliance policies to avoid costly penalties and legal risks.
Final Thoughts: Stricter Requirements, But Clearer Guidelines
The Franchising Code of Conduct 2025 introduces tougher regulations, but also provides clearer compliance guidelines for franchisors.
✅ Stronger financial disclosure rules protect franchisees.
✅ More transparency in early termination and investment return expectations.
✅ Increased enforcement & penalties for non-compliance.
🔹 How Can Franchisors Prepare?
- Review & update all franchise agreements before April 1, 2025.
- Ensure financial projections & disclosures are transparent.
- Budget for potential compensation payments.
- Engage in dispute resolution to avoid reputational damage.
💡 Need help navigating these changes?
As proud members of the Franchise Council of Australia, we are here to help ensure your franchise remains compliant with the New Code.
📩 Email us or book a free consultation today!
Remember, while this information provides a general overview, legal advice tailored to your specific circumstances is invaluable. Don’t hesitate to contact Rise Legal for personalised guidance or book in a free Discovery Call.
Disclaimer: This blog post is intended for informational purposes only and should not be considered legal advice. Consult with a qualified commercial lawyer for personalised advice related to your specific circumstances.
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