Franchise Disputes FAQ

The Franchising Code of Conduct (Schedule 1 to the Competition and Consumer (Industry Codes — Franchising) Regulation 2014) is the primary regulatory instrument. It operates under the Competition and Consumer Act 2010 (Cth). The Australian Consumer Law also applies to franchising conduct.

A mandatory industry code that regulates the conduct of franchisors and franchisees. It requires pre-entry disclosure, imposes a good faith obligation, mandates dispute resolution through mediation, and regulates termination, transfer, and renewal of franchise agreements.

A franchisor must give a prospective franchisee a disclosure document at least 14 days before the franchisee enters the agreement or makes a non-refundable payment. It must contain prescribed information including financial details, litigation history, obligations of both parties, territory details, and a copy of the franchise agreement.

Since 1 January 2015, both parties to a franchise agreement must act in good faith in their dealings with each other. Good faith includes acting honestly, not acting arbitrarily or capriciously, making reasonable efforts to cooperate, and not acting in a way that undermines or denies the benefit of the agreement.

Common disputes include misleading earnings representations, inadequate disclosure, unreasonable restraint of trade clauses, territory encroachment, failure to provide promised support or training, excessive fees, unfair termination or non-renewal, and breaches of the good faith obligation.

The Code mandates a multi-step process: (1) internal complaint handling by the franchisor, (2) mediation through an approved mediator or the Office of the Franchising Mediation Adviser (OFMA). If mediation fails, the parties can pursue court proceedings or arbitration if agreed. The ACCC may also investigate.

The ACCC enforces the Franchising Code and the Australian Consumer Law as they apply to franchising. It investigates complaints, takes enforcement action for breaches, issues infringement notices, and publishes guidance. The ACCC has brought successful prosecutions for unconscionable conduct and misleading disclosure.

The Code restricts termination. A franchisor cannot terminate without cause during the term of the agreement. Termination for breach requires written notice specifying the breach and a reasonable opportunity to remedy it (generally 30 days). Immediate termination is allowed only in limited circumstances such as fraud, insolvency, or abandonment.

If the agreement has a renewal option, the franchisor must provide reasonable notice of whether it intends to renew or not (at least 6 months before expiry). If there is no renewal option, the franchisee has no automatic right of renewal. The franchisor must act in good faith in relation to renewal decisions.

The Australian Consumer Law prohibits unconscionable conduct in trade or commerce. In franchising, this can include taking advantage of a franchisee's lower-quality bargaining position, making unreasonable demands, using unfair contract terms, or using undue pressure to agree to unfavourable changes.

Most franchise agreements permit transfer with the franchisor's consent, which must not be unreasonably withheld. The Code requires the franchisor to respond to a transfer request within 42 days. The franchisor can impose reasonable conditions such as the transferee meeting selection criteria and completing training.

Many franchise agreements include post-termination restraint clauses preventing the franchisee from operating a competing business. These are enforceable only to the extent they are reasonable in duration, geographic scope, and the activities restrained. Courts assess reasonableness at the time of enforcement.

A franchisee has a 14-day cooling-off period after entering the franchise agreement or making a payment. During this period, the franchisee can terminate the agreement by written notice. The franchisor must refund all payments within 14 days, less reasonable expenses already incurred.

If the franchisor requires contributions to a marketing or advertising fund, the fund must be audited annually and the audited financial statements must be provided to contributing franchisees within 4 months of the financial year end. Funds must be spent for the purposes stated in the agreement.

Remedies include damages, injunctions, declarations, and pecuniary penalties. The ACCC can issue infringement notices for certain breaches. Courts can impose civil penalties of up to $50,000 per contravention for individuals and $500,000 for corporations for breach of the Code.

The Franchise Disclosure Register was introduced in 2024 requiring franchisors to lodge key information with the ACCC, including the number of franchisees, franchise fees, and outlets. The register aims to improve transparency and assist the ACCC in monitoring the sector.

Yes. The Code protects the right of franchisees to form or join a franchisee association or advisory council. A franchisor must not prevent, restrict, or penalise a franchisee for participating in such an association. This right is reinforced by the good faith obligation.

If a franchisor makes earnings claims (whether in the disclosure document or otherwise), they must have a reasonable basis for the claim and provide supporting information. Misleading earnings representations breach both the Franchising Code and the Australian Consumer Law, exposing the franchisor to damages and penalties.

The Code requires the franchisee to sign a statement confirming they have received and read the disclosure document, had independent legal and financial advice, and had at least 14 days to consider the agreement. Prospective franchisees should always obtain independent legal and accounting advice before signing.

Franchise disputes can be costly. Mediation through OFMA is relatively affordable (mediator fees are shared). Court proceedings typically cost $50,000 to $300,000 or more per party depending on complexity. Some solicitors offer conditional fee arrangements for strong claims with clear damages.