Without much fanfare last week Australia’s new, but long awaited, Franchising Code of Conduct was published. Since it is to take effect on 1 January 2015, Australian franchise systems need to work fast to make sure that their documents and processes are in order before the new year. 

Welcome to the August 2014 edition of the Holman Webb Lawyers Franchise Bulletin.

This year we have seen the delays and uncertainty continue to surround the introduction of the changes to the Franchising Code of Conduct including the new good faith obligation and monetary penalties for breaches. Click here to read more.

Disclosure documents need to be updated annually and businesses must provide their current information by the end of October 2013. While many franchisors tend to wait until the last minute to finalise the update, in 2013, there are a few issues to be aware of - which could mean you start this job earlier than usual.

In the United States, the issue of the competition between ‘bricks and mortar’ retail franchises and the online channel conducted by the franchisor has taken front place as the new form of “encroachment” claim made by franchisees in recent years.  In Australia our mandatory franchise disclosure document under the Franchising Code of Conduct requires prior disclosure to a franchisee of information relating to the franchise “territory”, but it refers to a physical geographic territory only and does not address encroachment through alternative channels of distribution, such as e-commerce.  This has been remedied with the proposed new form of disclosure document due for commencement from 1 January 2015.  (Note the new form is not law yet).

There has been some recent speculation amongst franchise lawyers about the potential impact of the recent Federal Court appeal decision in the case of Spar Licensing Pty Ltd v MIS Qld Pty Ltd (1 May 2014) on the practice of giving disclosure documents to prospective franchisees.  The decision raises some doubts about when to update the disclosure document.

The new Franchising Code changes appear to have hit a Constitutional bump in the road.  Those familiar with the movie ‘The Castle’ will recall that section 51(xxxi) says:

The Australian Government has released the draft new Franchising Code of Conduct for review (and yet more feedback).  The Minister for Small Business says the government wants to “promote growth in the sector, reduce red tape and make sure that all participants in the industry follow best practice principles”.  Does it do that?  Let’s look at the major changes:

Quite frequently business owners who have decided to enter into various arrangements for the distribution or licensing of their goods or services discover that the agreement reached is in law a “franchise agreement” and that they have unwittingly become a franchisor subject to additional regulation and obligations. If an agreement is a “franchise agreement” then there are certain legal requirements including mandatory disclosure prior to the grant of the franchise, procedures for transfer and termination and resolution of disputes.

When the word franchising is mentioned, most readers of the Health Law Bulletin think of fast food chains, home maintenance and retailing. What does it have to do with health, aged care and community services? 

Quite a lot it turns out from talking to Corinne Attard, who has recently joined Holman Webb in our Sydney office as a commercial partner specialising in franchising. Click here to read more.

Just one month from the publication of the report of Mr Alan Wein with respect to his review of the Franchising Code of Conduct, the Government’s consultation  paper was released to industry for comment on June 17.

The original report contained 18 recommendations for government with respect to proposed changes to regulation of the franchising industry.

The Government is now seeking industry response with respect to each of the recommendations and whether to implement these recommendations or to select another option, including leaving the Code unchanged.