The Morrison Government has delivered another big win for thousands of small businesses across the country as its Franchising reforms come into force today.
Franchisees will benefit from increased cooling off periods and greater certainty about the costs of running their businesses with strengthened prohibitions on franchisors requiring significant capital expenditure or payment for legal costs.
Franchisees will also be assisted by better balanced termination procedures, improved disclosure of leasing and marketing fund arrangements, restrictions on certain contract variations and an improved ability for ex-franchisees to conduct future business.
New car dealerships now also have confidence that the protections of the Franchising Code apply to agency models, and that manufacturers must include fair and reasonable compensation for franchisee dealerships in their contracts in the event of early termination.
The commencement of these reforms follows the Australian Small Business and Family Enterprise Ombudsman’s expanded role to assist parties with arbitration, in addition to the existing dispute resolution procedures under the Franchising Code.
Minister for Employment, Workforce, Skills, Small and Family Business, Stuart Robert, welcomed the commencement of the reforms to the Franchising Code of Conduct.
‘Small businesses have no greater friend than the Morrison Government and the changes to the Franchising Code that come into force today are another example of us getting government to work for business, which is particularly important for smaller businesses,’ Minister Robert said.
‘These reforms are so important, the franchising sector has faced some really difficult days over the past 18 months but it’s clear the changes will go a long way to restoring confidence and addressing power imbalances within the sector. Even in the face of ongoing uncertainty for many businesses these reforms will ensure government has the settings right to support businesses to grow, creating more jobs for Australians.’
Background
Australia’s franchising sector is made up of approximately 90,000 franchisee small and family businesses, has over 1,200 brands and is worth $154 billion.
From 1 November 2021, prospective franchisees will also benefit from improved transparency to assist them to make an initial assessment about a franchise offer. Before buying any business, proper due diligence is essential, and this improved information will assist prospective franchisees to consider the risks and opportunities associated with franchising.
Further detail of the Franchising Code of Conduct reforms can be found on the Treasury website.