On 8 February 2024 the Federal Government released the Independent Review of the Franchising Code of Conduct by Dr Michael Schaper.

The Review found the Code is generally fit for purpose and recommended relatively few amendments. A principal focus of the Review is a need for improved Government education and guidance to the sector. The Review also recommends further evaluation of the merits of introducing a possible franchisor licensing regime.

The Review’s recommendations/suggestions include the following:

• Amendment to the definition of motor vehicle dealership to ensure the Code applies to service and repair work as well as sales.
• Clauses 46A and 46B (presently only applicable to new vehicle dealerships) apply to all franchises.
  • 46B provides a franchisor must not enter into a franchise agreement unless the agreement provides the franchisee with a reasonable opportunity to make a return, during the term of the agreement, on any investment required by the franchisor as part of entering into, or under, the agreement.
  • 46A provides a franchisor must not enter into a franchise agreement unless the agreement provides for compensation in the event that the franchisor terminates the agreement early in particular circumstances (eg withdrawal of the franchisor from the market).
• Streamlining of disclosure materials (potentially by retiring the Key Facts Sheet or merging it with the disclosure document).
• Existing franchisees should be able to opt out of disclosure and cooling off for new franchise agreements, renewals or extensions.
• Require additional information regarding dispute resolution to be included on the Franchise Disclosure Register.
• Provision of increased and more accessible compliance education to the sector by Government, including by establishing a single comprehensive online resource.
• Provisions relating to termination for serious breaches should be simplified.
• Amendment to section 82(3) of the Competition and Consumer Act to permit franchisees to seek ‘no adverse costs’ orders in relation to claims a franchisor has breached the Code.
• Civil penalties be applied to all Code contraventions and an increase to the penalty under the infringement notice regime.

The measured approach recommended by the Review is likely to be welcomed by a franchise industry which has been required to respond to detailed reforms in recent years. While supporting further investigation of adoption of an ex ante licensing regime, the Review recognises this would be a significant change and would require further consideration in consultation with stakeholders.

Please contact us should you have any questions regarding the Review. We will provide a further update once the detail of resulting reforms is available.