Over the last couple of years, the Franchising Code of Conduct has increased the disclosure obligations on franchisors. However, franchisors have always had to make sure that, in simple terms, they deliver what they promise to franchisees.

Under the Australian Consumer Law, franchisors can be liable where they engage in misleading or deceptive conduct – which can include promising an amount of start-up costs without a reasonable basis.

The Federal Court recently found that this is what took place within the ‘UFC Gym’ system in Australia.

Franchise agreements often contain restraints of trade. The restraints typically apply for a period of time after the franchise ends, and may restrict franchisees from competing with the network or conducting a similar business within a particular geographical area.

Whilst these restraints can be legitimate and important protections for the franchise network, they can also be a major hinderance for franchisees looking to move onto their next venture.

Clause 23 of the Franchising Code of Conduct can be a way for franchisees to avoid the operation of these restraint clauses. However, it has quite a narrow application - and there numerous proactive steps that franchisees must take to obtain the benefit of the exception.

In life, and especially within the context of commercial arrangements, circumstances can arise where despite the best intentions and efforts of all stakeholders, things don’t work out. It can be nobody’s or everybody’s fault.

Franchise relationships are no exception, as was highly publicised in the inquiry into the operation and effectiveness of the Franchising Code of Conduct, which concluded in 2019.

This guide sets out, in brief terms, the options available for those looking to exit a franchise.

The guide assumes that there has been no breach of the franchise agreement by either party, as this will involve different considerations and processes.

The Franchising Code of Conduct may be about to change again - this time, to introduce a ‘Franchise Disclosure Register’.

It remains to be seen whether the exposure draft of the changes will become law (through changes to the Code), and if so whether any amendments are made as a result of the consultation process. Regardless - in anticipation, Holman Webb’s Franchising & Retail Group has answered some FAQs in respect of the introduction of the register.

The highly-anticipated changes to the Franchising Code of Conduct are now in force.

These changes follow a parliamentary inquiry into the Code, which began in 2018. The inquiry saw many franchisees explain how their franchised business failed, and the consequences on their lives. It also exposed questionable business strategies by some franchisors, and has directly led to at least one enforcement action by the Australian Competition and Consumer Commission.

It is important for both franchisors and franchisees to understand that significant changes to the Code are now in force – many of which involve imposing civil penalties for breach.

This article contains a summary of five core areas that have seen significant change. 

Trade marks are the essence of franchising. 

All franchise systems strive for widespread recognition of their 'brand'. A common thread between successful franchise systems is that their customers receive a consistent level of quality in goods and services provided under instantly recognisable trade marks. 

However, there are often complexities in the registration and use of trade marks within a franchise system. For franchisors, getting the licensing right is not always clear cut, nor is being able to secure registrations for new products. On the other hand, franchisees will often enhance the reputation of a trade mark, but have no ownership interest and can carry the risk of infringing a competitor's trade mark. 

This article explores the importance of trade marks to a franchise system, and the key parties involved in it.