Franchising Code of Conduct 2022 PDF

Competition and Consumer (Industry Codes— Franchising) Regulation 2014 Select Legislative Instrument No. 168, 2014 made under section 51AE of the Competition and Consumer Act 2010 Compilation No. 9 Compilation date: 11 November 2022 Includes amendments up to: F2022L01445 Registered: 15 November 2022 Prepared by the Office of Parliamentary Counsel, Canberra Authorised Version F2022C01111 registered 15/11/2022 About this compilation This compilation This is a compilation of the Competition and Consumer (Industry Codes—Franchising) Regulation 2014 that shows the text of the law as amended and in force on 11 November 2022 (the compilation date). The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law. Uncommenced amendments The effect of uncommenced amendments is not shown in the text of the compiled law. Any uncommenced amendments affecting the law are accessible on the Legislation Register (www.legislation.gov.au). The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. For more information on any uncommenced amendments, see the series page on the Legislation Register for the compiled law. Application, saving and transitional provisions for provisions and amendments If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes. Editorial changes For more information about any editorial changes made in this compilation, see the endnotes. Modifications If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. For more information on any modifications, see the series page on the Legislation Register for the compiled law. Self-repealing provisions If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes. Authorised Version F2022C01111 registered 15/11/2022 Contents 1 3 4 4A 5 Name................................................................................................. 1 Authority........................................................................................... 1 Code of conduct................................................................................ 1 Functions of Australian Small Business and Family Enterprise Ombudsman relating to Franchising Code of Conduct............................................................................................. 1 Transitional—clause 8...................................................................... 1 Schedule 1—Franchising Code of Conduct 3 Part 1—Introduction 3 Division 1—Preliminary 1 2 3 3A 3 Name of code.................................................................................... 3 Purpose of code................................................................................. 3 Application....................................................................................... 3 Code does not apply in relation to franchise agreement that forms part of arrangements relating to certain co-operatives or mutual entities.............................................................................. 4 Division 2—Definitions 4 5 5 Definitions........................................................................................ 5 Meaning of franchise agreement...................................................... 9 Division 2A—Amount of civil penalty for certain contraventions by bodies corporate 5A 11 Amount of civil penalty for certain contraventions by bodies corporate......................................................................................... 11 Division 3—Obligation to act in good faith 6 12 Obligation to act in good faith........................................................ 12 Part 2—Disclosure requirements before entry into a franchise agreement 14 Division 1—Application 7 14 Application of Part—master franchisors......................................... 14 Division 2—Disclosure document 8 9 9A 10 15 Franchisor must maintain a disclosure document........................... 15 Franchisor to give documents to a franchisee or prospective franchisee........................................................................................ 16 Key facts sheet................................................................................ 18 Franchisee or prospective franchisee to give advice to franchisor before entering into franchise agreement....................... 19 Division 3—Information statement 11 21 Franchisor to give information statement to prospective franchisee........................................................................................ 21 Part 3—Franchise agreements 22 Division 1—Application 12 22 Application of Part—master franchisors......................................... 22 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 i Registered: 15/11/2022 Division 2—Franchisor’s obligations 23 Subdivision A—Disclosure obligations 13 14 15 16 17 23 Copy of lease etc............................................................................. 23 Copy of other agreements............................................................... 24 Financial statements for marketing funds and other cooperative funds administered by or for franchisor or master franchisor............................................................................. 25 Franchisee may request copy of disclosure document.................... 26 Disclosure of materially relevant facts............................................ 26 Subdivision B—Notification obligations (other than for new vehicle dealership agreements) 17A 18 28 Application of Subdivision............................................................. 28 End of term arrangements............................................................... 28 Subdivision C—Record keeping obligations 19 29 Keeping certain information and documents................................... 29 Division 3—Terms of franchise agreement 19A 20 21 22 23 30 Franchisor’s legal costs relating to franchise agreement................. 30 Prohibition on release from liability etc.......................................... 30 Jurisdiction for settling disputes...................................................... 30 Costs of settling disputes................................................................. 31 Effect of restraint of trade clause if franchise agreement not extended.......................................................................................... 31 Division 4—Transfer of franchise agreement 24 25 33 Request for franchisor’s consent to transfer.................................... 33 Franchisor’s consent to transfer...................................................... 33 Division 5—Termination of franchise agreement 26 26A 26B 27 28 29 35 Termination—cooling off after entering into new franchise agreement........................................................................................ 35 Termination—cooling off after transferring franchise agreement........................................................................................ 36 Franchisee may propose termination at any time............................ 37 Termination—breach by franchisee................................................ 37 Termination—no breach by franchisee........................................... 38 Notice of termination by franchisor on particular grounds............. 38 Division 6—Miscellaneous 30 30A 31 31A 32 33 41 Significant capital expenditure not to be required........................... 41 Information and discussion about capital expenditure.................... 41 Payments to and from marketing funds........................................... 42 Franchisor not to vary franchise agreement retrospectively and unilaterally............................................................................... 42 Disclosure of former franchisee details........................................... 42 Association of franchisees or prospective franchisees.................... 43 Part 4—Resolving disputes 44 Division 1—General 34 35 36 37 ii Compilation No. 9 44 Internal complaint handling procedure............................................ 44 Resolving disputes.......................................................................... 44 When a party is taken to be trying to resolve a dispute................... 44 Right to bring proceedings unaffected............................................ 44 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Division 3—Code complaint handling procedure 45 Subdivision A—Notification of dispute 40A 40B 45 Notification of dispute.................................................................... 45 Similar disputes between 2 or more franchisees and one franchisor........................................................................................ 45 Subdivision B—ADR process 41A 41B 41C 46 ADR process................................................................................... 46 Termination of ADR process.......................................................... 46 Costs of ADR process..................................................................... 47 Subdivision C—Arbitration 43A 43B 43C 43D 47 Arbitration by agreement for dispute resolution............................. 47 Arbitration procedure...................................................................... 47 Termination of arbitration............................................................... 49 Costs of arbitration.......................................................................... 49 Subdivision D—Confidentiality 44A 49 Confidentiality requirements........................................................... 49 Part 5—New vehicle dealership agreements 50 Division 1—Preliminary 46 50 Application of Part.......................................................................... 50 Division 1A—Terms of agreement 46A 46B 51 Franchise agreement must provide for compensation for early termination............................................................................. 51 Franchise agreement must provide reasonable opportunity for return on franchisee’s investment.............................................. 52 Division 2—End of term obligations 47 48 49 53 Notification obligation—franchisor................................................ 53 Notification obligation—franchisee................................................ 53 Obligation to manage winding down of agreement......................... 54 Division 4—Resolving disputes 52 55 Franchisees may request multi-franchisee dispute resolution......... 55 Part 5A—Franchise Disclosure Register 56 Division 1—Establishment and content 53 53A 53B 56 Establishment of Register............................................................... 56 Contents of Register........................................................................ 56 Secretary may correct clerical errors and remove, update and replace certain information and documents..................................... 56 Division 2—Obligation to provide information for inclusion in the Register 53C 53D 53E 58 Initial obligation to provide information for inclusion in Register—franchisors that give a disclosure document on or before 31 October 2022................................................................... 58 Initial obligation to provide information for inclusion in Register—other franchisors............................................................ 59 Obligation to annually update or confirm information included in Register........................................................................ 60 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 iii Registered: 15/11/2022 Division 3—Redacting certain information from documents 53F 62 Redacting certain information from documents.............................. 62 Division 4—Giving of information by agents 53G 63 Agents may provide or give information........................................ 63 Division 5—Other matters 53H 53J 64 Delegations by Secretary................................................................ 64 Review of this Part.......................................................................... 64 Part 6—Application, saving and transitional provisions 65 Division 1—Amendments made by the Competition and Consumer (Industry Codes—Franchising) Amendment (New Vehicle Dealership Agreements) Regulations 2020 54 55 56 57 58 65 Definitions...................................................................................... 65 End of term obligations................................................................... 65 Capital expenditure......................................................................... 66 Resolving disputes.......................................................................... 66 Review of amendments................................................................... 66 Division 2—Amendments made by the Competition and Consumer (Industry Codes—Franchising) Amendment (Fairness in Franchising) Regulations 2021 59 60 61 62 63 64 65 66 67 68 69 68 Definitions...................................................................................... 68 Application of amendments relating to dispute resolution.............. 68 Application of provisions about leasing or other occupation of premises...................................................................................... 68 Application of provisions about marketing funds and other cooperative funds............................................................................ 68 Application of provisions about franchisor’s legal costs................. 69 Application of amendment relating to restraint of trade.................. 69 Application of provisions about termination................................... 69 Application of provisions about capital expenditure....................... 69 Application of provisions about retrospective variation of franchise agreements by franchisors............................................... 70 Application of amendments about new vehicle dealership agreements...................................................................................... 70 Application of amendments of Annexure 1 of Schedule 1 (about disclosure documents).......................................................... 70 Division 3—Amendments made by the Treasury Laws Amendment (Corporate Insolvency Reforms Consequential Amendments) Regulations 2021 70 71 Application of amendment to clause 17 (disclosure of materially relevant facts)................................................................. 71 Division 4—Amendments made by the Competition and Consumer (Industry Codes—Franchising) Amendment (Penalties and Other Matters) Regulations 2022 71 iv Compilation No. 9 72 Application of amendments relating to penalties............................ 72 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Division 5—Amendments made by the Competition and Consumer (Industry Codes—Franchising) Amendment (Additional Information) Regulations 2022 72 73 Application of amendments............................................................ 73 Annexure 1—Disclosure document for franchisee or prospective franchisee 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 17A 17B 18 19 20 21 22 23 74 First page........................................................................................ 74 Franchisor details............................................................................ 75 Business experience........................................................................ 75 Litigation......................................................................................... 76 Payments to agents.......................................................................... 77 Existing franchises.......................................................................... 77 Master franchises............................................................................ 78 Intellectual property........................................................................ 79 Franchise site or territory................................................................ 79 Supply of goods or services to a franchisee.................................... 80 Supply of goods or services by a franchisee................................... 81 Supply of goods or services—online sales...................................... 81 Sites or territories............................................................................ 82 Other payments............................................................................... 83 Marketing fund or other cooperative funds..................................... 84 Financing........................................................................................ 84 Unilateral variation of franchise agreement.................................... 85 Arbitration of disputes.................................................................... 85 Ways of ending the franchise agreement early................................ 85 Term of agreement and arrangements to apply at the end of the franchise agreement.................................................................. 85 Amendment of franchise agreement on transfer of franchise.......... 87 Earnings information...................................................................... 87 Financial details.............................................................................. 88 Updates........................................................................................... 89 Receipt............................................................................................ 89 Endnotes 90 Endnote 1—About the endnotes Endnote 2—Abbreviation key 90 Endnote 3—Legislation history 92 Endnote 4—Amendment history 93 91 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 v Registered: 15/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Section 1 1 Name This is the Competition and Consumer (Industry Codes—Franchising) Regulation 2014. 3 Authority This instrument is made under section 51AE of the Competition and Consumer Act 2010. 4 Code of conduct For section 51AE of the Competition and Consumer Act 2010, the code set out in Schedule 1: (a) is prescribed; and (b) is a mandatory industry code. 4A Functions of Australian Small Business and Family Enterprise Ombudsman relating to Franchising Code of Conduct The Australian Small Business and Family Enterprise Ombudsman has the following functions in relation to the code set out in Schedule 1: (a) keeping lists of persons who can provide services of arbitration, conciliation or mediation for the purposes of that code or of a franchise agreement as defined in that code; (b) in accordance with that code, appointing persons who can provide services of arbitration, conciliation or mediation of disputes for the purposes of that code or a complaint handling procedure of a franchise agreement (as defined in that code), on request by one or more of the parties; (c) receiving information about disputes that are being, or have been, dealt with under that code or a complaint handling procedure of a franchise agreement as defined in that code; (d) regularly providing to the Minister statistical information relating to disputes that have been or are being dealt with under that code or a complaint handling procedure of a franchise agreement as defined in that code. 5 Transitional—clause 8 (1) Subclause 8(1) of the new code does not apply if a franchisor has an existing disclosure document. (2) If a franchisor has an existing disclosure document: (a) the existing disclosure document may be given under the new code before 1 November 2015; and Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 1 Registered: 15/11/2022 Section 5 (b) the franchisor must update the existing disclosure document so that it complies with subclauses 8(3), (4) and (5) of the new code by 31 October 2015; and (c) the requirements of subclause 8(6) of the new code apply to a financial year that begins on or after 1 January 2015. (3) In this section: existing disclosure document means a franchisor’s disclosure document (within the meaning of the old code) that exists on 1 January 2015. new code means the Franchising Code of Conduct set out in Schedule 1 to this instrument. old code means the Franchising Code of Conduct set out in the Schedule to the Trade Practices (Industry Codes—Franchising) Regulations 1998 as in force immediately before 1 January 2015. 2 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Introduction Part 1 Preliminary Division 1 Clause 1 Schedule 1—Franchising Code of Conduct Note: See section 4. Part 1—Introduction Division 1—Preliminary 1 Name of code This code is the Franchising Code of Conduct. 2 Purpose of code The purpose of this code is to regulate the conduct of participants in franchising towards other participants in franchising. 3 Application (1) Subject to subclause (4), this code applies to conduct occurring on or after 1 January 2015 (other than to discharge an outstanding obligation that arose under the old code) in relation to a franchise agreement entered into on or after 1 October 1998. (2) However, this code does not apply to a franchise agreement: (a) to which another mandatory industry code, prescribed under section 51AE of the Competition and Consumer Act 2010, applies; or (b) if: (i) the franchise agreement is for goods or services that are substantially the same as those supplied by the franchisee before entering into the franchise agreement; and (ii) the franchisee has supplied those goods or services for at least 2 years immediately before entering into the franchise agreement; and (iii) sales under the franchise are likely to provide no more than 20% of the franchisee’s gross turnover for goods or services of that kind for the first year of the franchise. (3) Paragraph (2)(b) ceases to apply to a franchise agreement if: (a) sales under the franchise provide more than 20% of the franchisee’s gross turnover for the goods or services for 3 consecutive years; and (b) the franchisee tells the franchisor that paragraph (a) of this subclause applies. (4) The provisions of this code mentioned in column 2 of the following table in relation to an item do not apply to a franchise agreement mentioned in column 1 of the item: Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 3 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 1 Introduction Division 1 Preliminary Clause 3A Provisions of this code that do not apply to certain franchise agreements Column 1 Column 2 Item If a franchise agreement is entered into … these provisions do not apply to the agreement … 1 on or after 1 March 2008 but before 1 January 2015 (a) subclause 21(2); and (b) clauses 22 and 23 2 on or after 1 October 1998 but before 1 March 2008 (a) paragraph 20(1)(b); and (b) subclause 21(2); and (c) clauses 22 and 23 (5) However, subclause (4) ceases to apply in relation to a franchise agreement mentioned in column 1 of the table in that subclause if the agreement is varied or transferred on or after 1 January 2015. (6) In this clause: old code means the Franchising Code of Conduct set out in the Schedule to the Trade Practices (Industry Codes—Franchising) Regulations 1998 as in force immediately before 1 January 2015. 3A Code does not apply in relation to franchise agreement that forms part of arrangements relating to certain co-operatives or mutual entities This code does not apply in relation to a franchise agreement that forms part of arrangements under which the franchisee is: (a) a member of a co-operative that is entered on a register maintained under: (i) the Co-operatives National Law; or (ii) the Co-operatives Act 2009 (WA), as in force on the day this clause commences; or (b) a member with voting rights of a mutual entity. Note: 4 Compilation No. 9 For Co-operatives National Law, see subclause 4(1). For mutual entity, see subclause 4(2) of this code and section 51M of the Corporations Act 2001. Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Introduction Part 1 Definitions Division 2 Clause 4 Division 2—Definitions 4 Definitions (1) In this code: ABN has the same meaning as in the A New Tax System (Australian Business Number) Act 1999. ADR practitioner means a conciliator or mediator. ADR process means conciliation or mediation. ANZSIC division and subdivision codes means the division and subdivision codes for an industry that are specified in the Australian and New Zealand Standard Industrial Classification (ANZSIC) 2006, published by the Australian Bureau of Statistics, as existing on the day Schedule 1 to the Competition and Consumer (Industry Codes—Franchising) Amendment (Franchise Disclosure Register) Regulations 2022 commences. associate, for a franchisor, means a person: (a) who: (i) is a director or related body corporate, or a director of a related body corporate, of the franchisor; or (ii) for a franchisor that is a proprietary company—directly or indirectly owns, controls, or holds with power to vote, at least 15% of the issued voting shares in the franchisor; or (iii) is a partner of the franchisor; and (b) whose relationship with the franchisor is relevant to the franchise system, including because: (i) the person supplies goods or services to a franchisee; or (ii) the person gives the franchisee a right to occupy premises, whether under a lease or otherwise; or (iii) the person owns intellectual property used in the franchise system; or (iv) the person is involved in market research, market testing, market development, sales promotion or management of the franchise system. complainant has the meaning given by clause 35. Co-operatives National Law means the Law set out in the appendix to the Co-operatives (Adoption of National Law) Act 2012 (NSW), as in force on 1 July 2021, and applying in a State or Territory under the following: (a) the Co-operatives (Adoption of National Law) Act 2012 (NSW); (b) the Co-operatives National Law Application Act 2013 (Vic.); (c) the Co-operatives National Law Act 2020 (Qld); (d) the Co-operatives National Law (South Australia) Act 2013 (SA); (e) the Co-operatives National Law (Tasmania) Act 2015 (Tas.); Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 5 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 1 Introduction Division 2 Definitions Clause 4 (f) the Co-operatives National Law (ACT) Act 2017 (ACT); (g) the Co-operatives (National Uniform Legislation) Act 2015 (NT). disclosure document has the meaning given by clause 8. electronic signature of a person means the unique identification of the person in an electronic form. engage in conduct means: (a) do an act; or (b) omit to perform an act. extend: (a) in relation to the scope of a franchise agreement, means a material change to: (i) the terms and conditions of the agreement; or (ii) the rights of a person under or in relation to the agreement; or (iii) the liabilities that would be imposed on a person under or in relation to the agreement; or (b) in relation to the term of a franchise agreement, occurs when the period of the agreement is extended, other than because of an option exercisable by the franchisee during the term of the agreement. financial year, in relation to a franchisor and a franchise, means a period of 12 months in respect of which financial statements relating to the franchise are prepared for the franchisor. franchise includes the following: (a) the rights and obligations under a franchise agreement; (b) a master franchise; (c) a subfranchise; (d) an interest in a franchise. franchise agreement has the meaning given by clause 5. franchisee includes the following: (a) a person to whom a franchise is granted; (b) a person who otherwise participates in a franchise as a franchisee; (c) a subfranchisor in its relationship with a franchisor; (d) a subfranchisee in its relationship with a subfranchisor. franchise system includes a business system in which a franchisor grants a franchise to a franchisee. franchisor includes the following: (a) a person who grants a franchise; (b) a person who otherwise participates in a franchise as a franchisor; (c) a subfranchisor in its relationship with a subfranchisee; (d) a subfranchisor in a master franchise system; 6 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Introduction Part 1 Definitions Division 2 Clause 4 (e) a subfranchisor in its relationship with a franchisee. interest in a franchise includes a legal or beneficial interest in: (a) a franchise agreement or a franchised business, whether arising as a result of a guarantee of a franchisee’s obligations under the agreement or otherwise; or (b) shares or voting rights in a corporation, not being a listed corporation, that owns a franchised business; or (c) units or voting rights in a unit or other trust that owns a franchised business; or (d) the capital or income of a partnership that owns a franchised business. key facts sheet means a document that meets the requirements of subclause 9A(1). master franchise means a franchise in which the franchisor grants to a subfranchisor the right: (a) to grant a subfranchise; or (b) to participate in a subfranchise. motor vehicle means a vehicle that uses, or is designed to use, volatile spirit, gas, oil, electricity or any other power (except human or animal power) as the principal means of propulsion, but does not include a vehicle used, or designed to be used, on a railway or tramway. Note: Examples of motor vehicles are as follows: (a) motor car; (b) motorcycle; (c) tractor; (d) motorised farm machinery; (e) motorised construction machinery; (f) aircraft; (g) motor boat. motor vehicle dealership: (a) means a business of buying, selling, exchanging or leasing motor vehicles that is conducted by a person other than a person who is only involved as a credit provider, or provider of other financial services, in the purchase, sale, exchange or lease; and (b) includes a business of selling motor vehicles that is conducted by a person (for the purposes of this code, the franchisee) who sells the motor vehicles as an agent for a principal (for the purposes of this code, the franchisor). new light goods vehicle means a new road vehicle of the kind referred to in clause 4.5.5 of the Vehicle Standard (Australian Design Rule – Definitions and Vehicle Categories) 2005. new passenger vehicle means a new road vehicle of a kind referred to in clause 4.3 of the Vehicle Standard (Australian Design Rule – Definitions and Vehicle Categories) 2005. Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 7 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 1 Introduction Division 2 Definitions Clause 4 new road vehicle has the same meaning as in section 78 of the Road Vehicle Standards Act 2018. new vehicle dealership agreement means a motor vehicle dealership agreement relating to a motor vehicle dealership that predominantly deals in new passenger vehicles or new light goods vehicles (or both). Note: A motor vehicle dealership agreement is taken to be a franchise agreement (see paragraph 5(2)(c)). obligation to act in good faith: see clause 6. Ombudsman means the Australian Small Business and Family Enterprise Ombudsman. prospective franchisee means a person who deals with a franchisor for the right to be granted a franchise. Register means the Franchise Disclosure Register established and maintained under clause 53. renew, in relation to a franchise agreement, occurs when the franchisee exercises an option during the term of the agreement to renew the agreement. respondent has the meaning given by clause 35. Secretary means the Secretary of the Department that is administered by the Minister administering the Australian Small Business and Family Enterprise Ombudsman Act 2015. serious offence means: (a) an offence under any law of the Commonwealth or a State or a Territory for which, if the act or omission had taken place in the Jervis Bay Territory, a person would be liable, on first conviction, to imprisonment for a period of not less than 5 years; or (b) a contravention of any provision of the Corporations Act 2001. Note: Jervis Bay Territory is mentioned because it is a jurisdiction in which the Commonwealth has control over the criminal law. significant capital expenditure has a meaning affected by subclause 30(2). subfranchisor means a person who is: (a) a franchisee in relation to a master franchise; and (b) a franchisor in relation to a subfranchise granted under the master franchise. trade mark has the meaning given by the Trade Marks Act 1995. Note: 8 Compilation No. 9 A trade mark is a sign (including any letter, word, name, signature, numeral, device, brand, heading, label, ticket, aspect of packaging, shape, colour, sound or scent (or any combination of these)) used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person (see section 17 of the Trade Marks Act 1995). Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Introduction Part 1 Definitions Division 2 Clause 5 transfer, in relation to a franchise agreement, includes a situation in which: (a) the agreement is terminated on the basis that a new franchise agreement is entered into between the franchisor and prospective transferee; or (b) the franchisee’s rights and obligations under the agreement are assigned to a prospective transferee; or (c) the agreement contemplates a transfer in specified circumstances and those circumstances happen. virtual attendance technology means any technology that allows a person to attend an ADR process or an arbitration without being physically present at the ADR process or arbitration. (2) In this code, the following terms have the meanings given by the Corporations Act 2001: ACN ARBN body corporate Chapter 5 body corporate consolidated entity director insolvent under administration listed corporation misconduct mutual entity officer proprietary company registered company auditor registered office related body corporate restructuring practitioner small proprietary company 5 Meaning of franchise agreement (1) A franchise agreement is an agreement: (a) that takes the form, in whole or part, of any of the following: (i) a written agreement; (ii) an oral agreement; (iii) an implied agreement; and (b) in which a person (the franchisor) grants to another person (the franchisee) the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the franchisor or an associate of the franchisor; and Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 9 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 1 Introduction Division 2 Definitions Clause 5 (c) under which the operation of the business will be substantially or materially associated with a trade mark, marketing or a commercial symbol: (i) owned, used or licensed by the franchisor or an associate of the franchisor; or (ii) specified by the franchisor or an associate of the franchisor; and (d) under which, before starting or continuing the business, the franchisee must pay or agree to pay to the franchisor or an associate of the franchisor an amount including, for example: (i) an initial capital investment fee; or (ii) a payment for goods or services; or (iii) a fee based on a percentage of gross or net income whether or not called a royalty or franchise service fee; or (iv) a training fee or training school fee; but excluding: (v) payment for goods and services supplied on a genuine wholesale basis; or (vi) repayment by the franchisee of a loan from the franchisor or an associate of the franchisor; or (vii) payment for goods taken on consignment and supplied on a genuine wholesale basis; or (viii) payment of market value for purchase or lease of real property, fixtures, equipment or supplies needed to start business or to continue business under the franchise agreement. (2) For subclause (1), each of the following is taken to be a franchise agreement: (a) the transfer or renewal of a franchise agreement; (b) the extension of the term or the scope of a franchise agreement; (c) a motor vehicle dealership agreement. (3) However, none of the following in itself constitutes a franchise agreement: (a) an employer and employee relationship; (b) a partnership relationship; (c) a landlord and tenant relationship; (d) a mortgagor and mortgagee relationship; (e) a lender and borrower relationship. 10 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Introduction Part 1 Amount of civil penalty for certain contraventions by bodies corporate Division 2A Clause 5A Division 2A—Amount of civil penalty for certain contraventions by bodies corporate 5A Amount of civil penalty for certain contraventions by bodies corporate (1) This clause has effect for the purposes of the following civil penalty provisions of this code: (a) subclauses 17(1) and (2); (b) clause 33; (c) subclauses 46A(1), (2) and (3); (d) clause 46B. (2) The amount of the civil penalty for a contravention of a civil penalty provision referred to in subclause (1) by a body corporate is the greatest of the following: (a) $10,000,000; (b) if the court can determine the value of the benefit that the body corporate, and any body corporate related to the body corporate, has obtained directly or indirectly and that is reasonably attributable to the contravention—3 times the value of that benefit; (c) if the court cannot determine the value of that benefit—10% of the annual turnover of the body corporate during the period of 12 months ending at the end of the month in which the contravention occurred. Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 11 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 1 Introduction Division 3 Obligation to act in good faith Clause 6 Division 3—Obligation to act in good faith 6 Obligation to act in good faith Obligation to act in good faith (1) Each party to a franchise agreement must act towards another party with good faith, within the meaning of the unwritten law from time to time, in respect of any matter arising under or in relation to: (a) the agreement; and (b) this code. This is the obligation to act in good faith. Civil penalty: 600 penalty units. (2) The obligation to act in good faith also applies to a person who proposes to become a party to a franchise agreement in respect of: (a) any dealing or dispute relating to the proposed agreement; and (b) the negotiation of the proposed agreement; and (c) this code. Matters to which a court may have regard (3) Without limiting the matters to which a court may have regard for the purpose of determining whether a party to a franchise agreement has contravened subclause (1), the court may have regard to: (a) whether the party acted honestly and not arbitrarily; and (b) whether the party cooperated to achieve the purposes of the agreement. New vehicle dealership agreements (3A) Without limiting the matters to which a court may have regard for the purpose of determining whether a party to a new vehicle dealership agreement has contravened subclause (1) and without limiting subclause (3), the court must have regard to whether the terms of the agreement are fair and reasonable. Franchisor must not enter into franchise agreement that includes provision limiting or excluding obligation to act in good faith (4) A franchisor must not enter into a franchise agreement that includes a provision that limits or excludes, or purports to limit or exclude, the obligation to act in good faith. Civil penalty: 600 penalty units. (5) A franchisor must not enter into a franchise agreement that includes a provision that limits or excludes, or purports to limit or exclude, the obligation to act in good faith by applying, adopting or incorporating, with or without modification, 12 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Introduction Part 1 Obligation to act in good faith Division 3 Clause 6 the words of another document, as in force at a particular time or as in force from time to time, in the agreement. Civil penalty: 600 penalty units. Other actions may be taken consistently with the obligation (6) To avoid doubt, the obligation to act in good faith does not prevent a party to a franchise agreement, or a person who proposes to become such a party, from acting in his, her or its legitimate commercial interests. (7) If a franchise agreement does not: (a) give the franchisee an option to renew the agreement; or (b) allow the franchisee to extend the agreement; this does not mean that the franchisor has not acted in good faith in negotiating or giving effect to the agreement. Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 13 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 2 Disclosure requirements before entry into a franchise agreement Division 1 Application Clause 7 Part 2—Disclosure requirements before entry into a franchise agreement Division 1—Application 7 Application of Part—master franchisors A master franchisor need not comply with the requirements of this Part in relation to a subfranchisee. 14 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Disclosure requirements before entry into a franchise agreement Part 2 Disclosure document Division 2 Clause 8 Division 2—Disclosure document 8 Franchisor must maintain a disclosure document Disclosure document to inform franchisee or prospective franchisee (1) A franchisor must create a document (a disclosure document) relating to a franchise that complies with subclauses (3), (4) and (5). Civil penalty: 600 penalty units. (2) The purpose of a disclosure document is to: (a) give a prospective franchisee, or a franchisee proposing to: (i) enter into a franchise agreement; or (ii) renew a franchise agreement; or (iii) extend the term or scope of a franchise agreement; information from the franchisor to help the franchisee to make a reasonably informed decision about the franchise; and (b) give a franchisee current information from the franchisor that is material to the running of the franchised business. Content and form of disclosure document (3) Information in a disclosure document must: (a) comply with the following: (i) be set out in the form and order of Annexure 1; (ii) use the headings and numbering of Annexure 1; (iii) if applicable—include additional information under the heading “Updates”; or (b) comply with the following: (i) if particular items are applicable—use the headings and numbering of Annexure 1 for those items; (ii) if particular items are not applicable—include an attachment that sets out the headings and numbering of Annexure 1 for those items. (4) A disclosure document must be signed by the franchisor, or a director, officer or authorised agent of the franchisor. (5) A disclosure document must also have a table of contents based on the items in Annexure 1, indicating the page number on which each item begins. If the disclosure document attaches other documents, the table of contents must list these other documents too. Maintaining a disclosure document (6) After entering into a franchise agreement, the franchisor must update the disclosure document within 4 months after the end of each financial year. Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 15 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 2 Disclosure requirements before entry into a franchise agreement Division 2 Disclosure document Clause 9 Civil penalty: 600 penalty units. (7) However, the franchisor need not update the disclosure document after the end of a financial year if: (a) the franchisor did not enter into a franchise agreement, or only entered into 1 franchise agreement, during the year; and (b) the franchisor does not intend, or if the franchisor is a company, its directors do not intend, to enter into another franchise agreement in the following financial year. (8) Despite subclause (7), if a request is made under subclause 16(1), the franchisor must update the disclosure document so that it reflects the position of the franchise as at the end of the financial year before the financial year in which the request is made. Civil penalty: 600 penalty units. 9 Franchisor to give documents to a franchisee or prospective franchisee (1) A franchisor must give a prospective franchisee the documents mentioned in subclause (1A) at least 14 days before whichever of the following occurs first: (a) the franchisor and the prospective franchisee enter into a franchise agreement; (b) the prospective franchisee makes a non-refundable payment (whether of money or of other valuable consideration) to the franchisor or an associate of the franchisor in connection with the proposed franchise agreement. Civil penalty: 600 penalty units. (1A) For the purposes of subclause (1), the documents are as follows: (a) a copy of the franchise agreement, in the form in which it is to be executed; (b) a copy of the disclosure document relating to the franchise: (i) as updated under subclause 8(6); or (ii) if subclause 8(7) applies—updated to reflect the position of the franchise as at the end of the financial year before the financial year in which the copy of the disclosure document is given; or (iii) if the disclosure document is created in the financial year in which the copy of the disclosure document is given—as created under subclause 8(1); (c) a copy of the key facts sheet relating to the franchise: (i) as updated under subclause 9A(2); or (ii) if subclause 9A(3) applies—updated to reflect the position of the franchise as at the end of the financial year before the financial year in which the copy of the key facts sheet is given; or (iii) if the key facts sheet is created in the financial year in which the copy of the key facts sheet is given—as created under subclause 9A(1); (d) a copy of this code; (e) if: 16 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Disclosure requirements before entry into a franchise agreement Part 2 Disclosure document Division 2 Clause 9 (i) premises are leased to the franchisor or an associate of the franchisor; and (ii) the franchisor or associate proposes to sublease the premises to the prospective franchisee for the purposes of a franchised business, or to permit the prospective franchisee to occupy the premises for those purposes without a lease; a copy of: (iii) the lease of the premises to the franchisor or associate or, if the franchisor or associate is not in possession of the lease, a summary of the commercial terms negotiated by the franchisor or associate and the lessor of the premises (including any lease incentives); and (iv) if the lessor of the premises to the franchisor or associate complies with a requirement by or under a law of a State or Territory to disclose to the franchisor or associate (as lessee) written information relating to the lease—that information or, if the franchisor or associate is not in possession of that information, any information of that kind of which the franchisor is aware. Note: If it is proposed that the prospective franchisee lease premises from, or occupy premises under another right granted by, the franchisor or an associate, clause 26 lets the franchisee terminate the franchise agreement up to 14 days after being given a document setting out the terms of the lease or right to occupy the premises. (2) If a franchisor or franchisee proposes to: (a) renew a franchise agreement; or (b) extend the term or scope of a franchise agreement; the franchisor must give to a franchisee (within the meaning of paragraph (a) of the definition of that expression) the documents mentioned in subclause (1A) at least 14 days before renewal or extension of the franchise agreement. Civil penalty: 600 penalty units. (2A) If a request is made under clause 24 that a franchisor consent to the transfer of a franchise agreement (the existing franchise agreement) to a person (the prospective transferee), the franchisor must, at least 14 days before giving the consent, give the prospective transferee: (a) if the transfer does not involve executing another franchise agreement: (i) a copy of the existing franchise agreement; and (ii) each other document (if any) the franchisor requires the prospective transferee to sign to give effect to the transfer; and (b) a copy of the documents mentioned in paragraphs (1A)(b), (c) and (d) and, if applicable, paragraph (1A)(e). Civil penalty: 600 penalty units. (2B) However, subclause (2A) does not apply to a transfer that involves entry into a new franchise agreement. Note: Subclause (1) applies to such a transfer. Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 17 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 2 Disclosure requirements before entry into a franchise agreement Division 2 Disclosure document Clause 9A (2C) If the person to whom documents must be given under subclause (1), (2) or (2A) requests the documents in printed form, electronic form or both, the franchisor must comply with the request. However, if the documents have been given in one of those forms (whether requested by the person or not) by the time required by that subclause, a later request for the documents in the other form (or both forms) does not require the franchisor to comply with the subclause again. (3) A franchisor is taken to have complied with the requirements of this clause even if, during the relevant 14-day or longer period, changes are made to a franchise agreement: (a) to give effect to a franchisee’s request; or (b) to fill in required particulars; or (c) to reflect changes of address or other circumstances; or (d) for clarification of a minor nature; or (e) to correct errors or references. (4) If: (a) the franchisor gives a person documents under subclause (1), (2) or (2A) in relation to a franchise agreement; and (b) after giving those documents and before the franchise agreement is entered into, renewed, extended or transferred, the franchisor gives the person earnings information in relation to the franchise; the franchisor is taken not to have given the person the documents required by subclause (1), (2) or (2A) (as applicable) in relation to the franchise agreement. 9A Key facts sheet Requirements for key facts sheet (1) The key facts sheet relating to a franchise: (a) must be in the form published on the Commission’s website; and (b) must include the information required by the form; and (c) must include only information about matters relating to the franchise: (i) that is included in the disclosure document relating to the franchise; or (ii) that is required to be given to the franchisee under this code. Maintaining a key facts sheet (2) After entering into a franchise agreement, the franchisor must update the key facts sheet relating to the franchise within 4 months after the end of each financial year. Civil penalty: 600 penalty units. (3) However, the franchisor need not update the key facts sheet after the end of a financial year if: (a) the franchisor did not enter into a franchise agreement, or only entered into one franchise agreement, during the year; and 18 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Disclosure requirements before entry into a franchise agreement Part 2 Disclosure document Division 2 Clause 10 (b) the franchisor does not intend, or if the franchisor is a company, its directors do not intend, to enter into another franchise agreement in the following financial year. (4) Despite subclause (3), if a request is made under subclause 16(1), the franchisor must update the key facts sheet so that it reflects the position of the franchise as at the end of the financial year before the financial year in which the request is made. Civil penalty: 600 penalty units. 10 Franchisee or prospective franchisee to give advice to franchisor before entering into franchise agreement (1) The franchisor must not: (a) enter into a franchise agreement; or (b) renew or transfer a franchise agreement; or (c) extend the term or scope of a franchise agreement; or (d) enter into an agreement to: (i) enter into a franchise agreement; or (ii) renew or transfer a franchise agreement; or (iii) extend the term or scope of a franchise agreement; or (e) receive a non-refundable payment (whether of money or of other valuable consideration) under a franchise agreement or an agreement to enter into a franchise agreement; unless the franchisor has received from the franchisee or prospective franchisee a written statement that the franchisee or prospective franchisee has received, read and had a reasonable opportunity to understand the disclosure document and this code. (2) Before a franchise agreement is entered into, the franchisor must have received from the prospective franchisee: (a) signed statements, that the prospective franchisee has been given advice about the proposed franchise agreement or franchised business, by: (i) an independent legal adviser; or (ii) an independent business adviser; or (iii) an independent accountant; or (b) for each kind of statement not received under paragraph (a), a signed statement by the prospective franchisee that the prospective franchisee: (i) has been given that kind of advice about the proposed franchise agreement or franchised business; or (ii) has been told that that kind of advice should be sought but has decided not to seek it. (3) Subclause (2): (a) does not apply to: (i) the renewal of a franchise agreement; or Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 19 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 2 Disclosure requirements before entry into a franchise agreement Division 2 Disclosure document Clause 10 (ii) the extension of the term or scope of a franchise agreement; and (b) does not prevent the franchisor from requiring any or all of the statements mentioned in paragraph (2)(a). (4) In this clause, a reference to a prospective franchisee includes a reference to a prospective transferee. 20 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Disclosure requirements before entry into a franchise agreement Part 2 Information statement Division 3 Clause 11 Division 3—Information statement 11 Franchisor to give information statement to prospective franchisee (1) A franchisor must give a copy of the information statement relating to franchising that is published on the Commission’s website to a prospective franchisee. The copy of the information statement must be given: (a) as soon as practicable, and not later than 7 days, after the prospective franchisee formally applies or expresses an interest in acquiring a franchised business; and (b) before the franchisor gives the prospective franchisee any of the documents described in clause 9. Civil penalty: 600 penalty units. (4) To avoid doubt, the requirements of this clause do not apply in relation to: (a) the renewal of a franchise agreement; or (b) the extension of the term or scope of a franchise agreement. Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 21 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 3 Franchise agreements Division 1 Application Clause 12 Part 3—Franchise agreements Division 1—Application 12 Application of Part—master franchisors (1) A master franchisor need not comply with the requirements of this Part in relation to a subfranchisee. (2) This clause does not limit the effect of clauses 15 and 31. 22 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Franchise agreements Part 3 Franchisor’s obligations Division 2 Clause 13 Division 2—Franchisor’s obligations Subdivision A—Disclosure obligations 13 Copy of lease etc. Occupying premises under lease (1) If a franchisee leases premises from the franchisor or an associate of the franchisor for the purposes of a franchised business, the franchisor or the associate must give to the franchisee: (a) either: (i) a copy of the lease; or (ii) a copy of the agreement to lease; and (b) details of any incentive or financial benefit that the franchisor or associate is entitled to receive as a result of the lease or agreement to lease. Civil penalty: 600 penalty units. (2) The copy and details must be given within 1 month after the lease or agreement to lease is signed by the parties. Civil penalty: 600 penalty units. (2A) If: (a) premises are leased to the franchisor or an associate of the franchisor; and (b) a franchisee subleases, or a prospective franchisee proposes to sublease, the premises for the purposes of a franchised business; and (c) the lessor of the premises to the franchisor or associate complies with a requirement by or under a law of a State or Territory to disclose to the franchisor or associate (as lessee) written information relating to the lease; the franchisor or associate must, if requested to do so in writing, give the franchisee or prospective franchisee a copy of that information. Note: A copy must also be given by the franchisor to a prospective franchisee before entering into a franchise agreement (see subclauses 9(1) an (1A)). Civil penalty: 600 penalty units. (2B) The copy requested under subclause (2A) must be given as soon as reasonably practicable, and not later than 7 days, after the request is made. Civil penalty: 600 penalty units. (3) If the franchisee occupies, without a lease, premises leased by the franchisor or an associate of the franchisor, the franchisor or the associate must give the following to the franchisee: (a) a copy of the franchisor’s lease or agreement to lease or of the associate’s lease or agreement to lease; Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 23 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 3 Franchise agreements Division 2 Franchisor’s obligations Clause 14 (b) details of any incentive or financial benefit that the franchisor or associate is entitled to receive as a result of the lease or agreement to lease; (c) a copy of the documents that give the franchisee the right to occupy the premises; (d) written details of the conditions of occupation; (e) details of any incentive or financial benefit that the franchisor or associate is entitled to receive as a result of the franchisee’s right to occupy the premises. Civil penalty: 600 penalty units. (4) The copy and details must be given within 1 month after: (a) the occupation commences; or (b) for the documents mentioned in subparagraph (3)(b)(i)—the documents are signed by the parties. Civil penalty: 600 penalty units. (4A) If: (a) a franchisee occupies, or a prospective franchisee proposes to occupy, without a lease, premises for the purposes of a franchised business under a right given or to be given by the franchisor or an associate of the franchisor; and (b) the premises are leased to the franchisor or associate; and (c) the lessor of the premises to the franchisor or associate complies with a requirement by or under a law of a State or Territory to disclose to the franchisor or associate (as lessee) written information relating to the lease; the franchisor or associate must, if requested to do so in writing, give to the franchisee or prospective franchisee a copy of that information. Note: A copy must also be given by the franchisor to a prospective franchisee before entering into a franchise agreement (see subclauses 9(1) and (1A)). Civil penalty: 600 penalty units. (4B) The copy requested under subclause (4A) must be given as soon as reasonably practicable, and not later than 7 days, after the request is made. Civil penalty: 600 penalty units. Incentive or financial benefit (5) In this clause, the details of any incentive or financial benefit must include the name of the business providing the incentive or financial benefit. 14 Copy of other agreements (1) If a franchise agreement requires: (a) the franchisee; or (b) directors, shareholders, beneficiaries, owners or partners of the franchisee; 24 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Franchise agreements Part 3 Franchisor’s obligations Division 2 Clause 15 to enter into an agreement of a kind mentioned in subclause (2), the franchisor must give to the franchisee a copy of the agreement. Civil penalty: 600 penalty units. (2) The franchisor must give to the franchisee a copy of the following kinds of agreements: (a) a lease (other than a lease of premises which is covered by clause 13) or hire purchase agreement; (b) an agreement under which the franchisee gains ownership of, or is authorised to use, any intellectual property; (c) a security agreement, including a guarantee, mortgage, security deposit, indemnity, loan agreement or obligation to provide a bank guarantee to a third party; (d) a confidentiality agreement; (e) an agreement not to carry on business within an area or for a time after the franchise agreement is terminated. (3) The agreement must be given: (a) at least 14 days before the day on which the franchise agreement is signed, if it is available at that time; or (b) if it is not available at that time—when it becomes available. 15 Financial statements for marketing funds and other cooperative funds administered by or for franchisor or master franchisor (1) This clause applies if a franchise agreement requires the franchisee to pay money to a marketing fund or other cooperative fund controlled or administered by or for the franchisor or a master franchisor (whether the franchisee is a franchisee or subfranchisee of the franchisor or master franchisor). Preparing and auditing financial statements for fund (2) The fund administrator must: (a) within 4 months after the end of the last financial year, prepare an annual financial statement detailing all of the fund’s receipts and expenses for the last financial year; and (b) ensure that the statement includes sufficient detail of the fund’s receipts and expenses so as to give meaningful information about: (i) sources of income; and (ii) items of expenditure, particularly with respect to marketing (however described); and (c) have the statement audited by a registered company auditor within 4 months after the end of the financial year to which it relates. Civil penalty: 600 penalty units. (3) The fund administrator does not have to comply with paragraph (2)(c) in respect of a financial year if, within 3 months after the end of the year, 75% of the Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 25 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 3 Franchise agreements Division 2 Franchisor’s obligations Clause 16 franchisees (whether franchisees or subfranchisees of the franchisor or master franchisor) in Australia who contribute to the fund have voted to agree that the fund administrator does not have to comply with the paragraph in respect of the year. Giving copies of statements and audit reports to contributors to fund (4) The fund administrator must: (a) give the franchisee a copy of the statement within 30 days of preparing it; and (b) if an audit of the statement is required—give the franchisee a copy of the auditor’s report within 30 days of receiving it. Civil penalty: 600 penalty units. Costs of administering and auditing fund (5) The reasonable costs of administering and auditing the fund must be paid from the fund. Meaning of fund administrator (6) In this clause: fund administrator means: (a) the franchisor or master franchisor who controls or administers the fund; or (b) if the franchisor or master franchisor has authorised an associate to control or administer the fund—the authorised associate. 16 Franchisee may request copy of disclosure document (1) If a franchisee requests, in writing, a franchisor to give the franchisee a copy of the disclosure document relating to the franchise, the franchisor must give the franchisee a copy of the disclosure document and the key facts sheet relating to the franchise: (a) if subclause 8(8) applies—within 2 months of the date of the request; and (b) in any other case—within 14 days of the date of the request. Civil penalty: 600 penalty units. (2) However, a request under subclause (1) can be made only once every 12 months. (3) If the request is for the disclosure document in printed form, electronic form or both, the franchisor must give the copy of the disclosure document and the key facts sheet in the form or forms requested. 17 Disclosure of materially relevant facts Financial details (1) If: 26 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Franchise agreements Part 3 Franchisor’s obligations Division 2 Clause 17 (a) either: (i) a statement or declaration referred to in item 21 of Annexure 1 is made; or (ii) a document referred to in that item comes into existence; and (b) the statement or declaration is not reflected in, or the document is not provided together with, a disclosure document that has been updated under subclause 8(6); the franchisor must give to a prospective franchisee a copy of the statement, declaration or document, as soon as reasonably practicable, but in any event, before the prospective franchisee enters into a franchise agreement with the franchisor. Civil penalty: (a) for a contravention by a body corporate—the amount under clause 5A; or (b) for a contravention by a person who is not a body corporate—$500,000. Other matters (2) If a disclosure document does not mention a matter mentioned in subclause (3), the franchisor must tell a franchisee or prospective franchisee about the matter, in writing, within a reasonable time (but not more than 14 days) after the franchisor becomes aware of it. Civil penalty: (a) for a contravention by a body corporate—the amount under clause 5A; or (b) for a contravention by a person who is not a body corporate—$500,000. (3) For subclause (2), the matters are the following: (a) change in majority ownership or control of: (i) the franchisor or an associate of the franchisor; or (ii) the franchise system; (b) proceedings by a public agency, a judgment in criminal or civil proceedings or an award in an arbitration against the franchisor, a franchisor director, an associate of the franchisor or a director of an associate of the franchisor, in Australia alleging: (i) breach of a franchise agreement; or (ii) contravention of trade practices law; or (iii) contravention of the Corporations Act 2001; or (iv) unconscionable conduct; or (v) misconduct; or (vi) an offence of dishonesty; (c) a judgment against the franchisor or an associate of the franchisor, other than for unfair dismissal of an employee, under: (i) Part 3 of the Independent Contractors Act 2006; or (ii) a law of a State or Territory that regulates workplace relations or independent contractors; Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 27 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 3 Franchise agreements Division 2 Franchisor’s obligations Clause 17A (d) civil proceedings in Australia against the franchisor, a franchisor director, an associate of the franchisor or a director of an associate the franchisor, by at least 10%, or 10, of the franchisees in Australia of the franchisor (whichever is the lower); (e) any judgment that is entered against the franchisor or an associate of the franchisor in Australia, and is not discharged within 28 days, for at least: (i) for a small proprietary company—$100 000; or (ii) for any other company—$1 000 000; (f) any judgment that is entered against the franchisor or an associate of the franchisor in a matter mentioned in item 4 of Annexure 1; (g) the franchisor or an associate of the franchisor becoming a Chapter 5 body corporate; (h) a change in the intellectual property, or ownership or control of the intellectual property, that is material to the franchise system; (i) the existence and content of: (i) any undertaking given by the franchisor or an associate of the franchisor under section 87B of the Competition and Consumer Act 2010; and (ii) any order made by the Federal Court of Australia under that section in relation to such an undertaking. (4) For paragraphs (3)(b), (c), (d), (e) and (f), the franchisor must tell the franchisee: (a) the names of the parties to the proceedings; and (b) the name of the court or tribunal; and (c) the case number; and (d) the general nature of the proceedings. (5) For paragraph (3)(g), the franchisor must tell the franchisee the name and address of the administrator, controller, liquidator or restructuring practitioner. Note: Nothing in this code affects the operation of Part VIIC of the Crimes Act 1914 (which includes provisions that, in certain circumstances, relieve persons from the requirement to disclose spent convictions and require persons aware of such convictions to disregard them). Subdivision B—Notification obligations (other than for new vehicle dealership agreements) 17A Application of Subdivision This Subdivision does not apply to a new vehicle dealership agreement. Note: For new vehicle dealership agreements, see Division 2 of Part 5. 18 End of term arrangements (1) The franchisor of a franchise agreement must notify the franchisee, in writing, whether the franchisor intends to: (a) extend the agreement; or 28 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Franchise agreements Part 3 Franchisor’s obligations Division 2 Clause 19 (b) enter into a new agreement. (2) The franchisor’s notice must be given: (a) if the term of the franchise agreement is 6 months or longer—at least 6 months before the end of the term of the agreement; and (b) if the term of the franchise agreement is less than 6 months—at least 1 month before the end of the term of the agreement. Civil penalty: 600 penalty units. (3) Unless the franchisor does not intend to extend the franchise agreement, the franchisor’s notice must include a statement to the effect that, subject to subclause 16(2), the franchisee may request a disclosure document under clause 16. Civil penalty: 600 penalty units. Subdivision C—Record keeping obligations 19 Keeping certain information and documents (1) If this code requires a franchisee or prospective franchisee, or allows a franchisee or prospective franchisee, to give something to a franchisor in writing, the franchisor must keep the written thing or a copy of it. (2) If a franchisor: (a) makes a statement or claim in the franchisor’s disclosure document; and (b) relies on a document to support the statement or claim; the franchisor must keep the document. (3) A franchisor must keep the written thing or document for at least 6 years after it is created. Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 29 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 3 Franchise agreements Division 3 Terms of franchise agreement Clause 19A Division 3—Terms of franchise agreement 19A Franchisor’s legal costs relating to franchise agreement (1) A franchisor must not enter into a franchise agreement that has the effect of: (a) requiring the franchisee to pay all or part of the franchisor’s costs of legal services relating to preparing, negotiating or executing the agreement or documents relating to the agreement; or (b) allowing the franchisor or an associate of the franchisor to require the franchisee to pay all or part of those costs. Civil penalty: 600 penalty units. (2) Subclause (1) does not prevent the franchisor from entering into a franchise agreement that requires the franchisee to make a payment, before the franchisee starts the franchised business, of a fixed amount of dollars that: (a) is specified in the agreement; and (b) is stated in the agreement as being for the franchisor’s costs of legal services relating to preparing, negotiating or executing the agreement; and (c) is stated in the agreement not to include any amount for the franchisor’s costs of legal services that will or may be provided, after the agreement is entered into, in relation to preparing, negotiating or executing other documents. 20 Prohibition on release from liability etc. (1) A franchise agreement must not require a franchisee to sign: (a) a general release of the franchisor from liability towards the franchisee; or (b) a waiver of any verbal or written representation made by the franchisor. Note: See subclauses 3(4) and (5). (2) However, subclause (1) does not prevent a franchisee from settling a claim against the franchisor after entering into a franchise agreement. 21 Jurisdiction for settling disputes (1) A franchise agreement may contain a clause that: (a) if a party to the agreement wishes to bring an action or proceedings in relation to a dispute under the agreement, requires the party to bring the action or proceedings in a State or Territory in which the franchised business is based; or (b) if a party to the agreement wishes to refer a dispute under the agreement to an ADR process, requires the ADR process to be conducted in a State or Territory in which the franchised business is based. (2) A franchise agreement must not contain a clause that: 30 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Franchise agreements Part 3 Terms of franchise agreement Division 3 Clause 22 (a) requires a party to the agreement to bring an action or proceedings in relation to a dispute under the agreement: (i) in any State or Territory outside that in which the franchised business is based; or (ii) in any jurisdiction outside Australia; or (b) requires an ADR process for a dispute under the agreement to be conducted: (i) in any other State or Territory outside that in which the franchised business is based; or (ii) in any jurisdiction outside Australia. Note: See subclauses 3(4) and (5). 22 Costs of settling disputes A franchisor must not enter into a franchise agreement that includes a provision that requires the franchisee to pay to the franchisor costs incurred by the franchisor in relation to settling a dispute under the agreement. Note: See subclauses 3(4) and (5). Civil penalty: 600 penalty units. 23 Effect of restraint of trade clause if franchise agreement not extended (1) A restraint of trade clause in a franchise agreement has no effect after the agreement expires if: (a) the franchisee had given written notice to the franchisor seeking to extend the agreement on substantially the same terms as those: (i) contained in the franchisor’s current franchise agreement; and (ii) that apply to other franchisees or would apply to a prospective franchisee; and (b) immediately before the expiry, the franchisee was not in serious breach of the agreement or any related agreement; and (c) the franchisee had not infringed the intellectual property of, or a confidentiality agreement with, the franchisor during the term of the agreement; and (d) the franchisor does not extend the agreement; and (e) either: (i) the franchisee claimed compensation for goodwill because the agreement was not extended, but the compensation given was merely a nominal amount and did not provide genuine compensation for goodwill; or (ii) the agreement did not allow the franchisee to claim compensation for goodwill in the event that it was not extended. (2) Subclause (1) also applies in respect of a restraint of trade clause that is incorporated into a franchise agreement: (a) by reference to another document; or Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 31 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 3 Franchise agreements Division 3 Terms of franchise agreement Clause 23 (b) by another document physically attached to the agreement. Note: 32 Compilation No. 9 See subclauses 3(4) and (5). Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Franchise agreements Part 3 Transfer of franchise agreement Division 4 Clause 24 Division 4—Transfer of franchise agreement 24 Request for franchisor’s consent to transfer (1) A person may request, in writing, that a franchisor consent to the transfer of a franchise agreement. (2) A request must be accompanied by all information that the franchisor would reasonably require and expect to be given to make an informed decision. (3) If the franchisor requires further information to make an informed decision, the franchisor may, in writing, request the person to provide specified information relevant to making the decision. 25 Franchisor’s consent to transfer Giving consent (1) A franchisor must advise, in writing, a person who has made a request under clause 24 for consent to the transfer of a franchise agreement: (a) whether consent is given, and if not, give reasons why not; and (b) if consent is given—whether the franchisor’s consent is subject to one or more conditions being satisfied. (2) A franchisor must not unreasonably withhold consent to the transfer of a franchise agreement. Note: A franchisor may reasonably withhold consent to the transfer of a franchise agreement in the circumstances provided by subclause (6A). Civil penalty: 600 penalty units. Consent taken to be given (4) If the franchisor does not advise the person, in writing, that the franchisor does not consent to the transfer of the franchise agreement within 42 days of the later of: (a) the date the request is made; and (b) if the franchisor seeks further information—the date the last of the information is provided to the franchisor; then: (c) the franchisor is taken to have given consent; and (d) that consent cannot be revoked under subclause (5). Revoking consent (5) Within 14 days of giving consent, the franchisor may revoke it by advising the person, in writing, that the franchisor’s consent is revoked and the reasons why consent has been revoked. Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 33 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 3 Franchise agreements Division 4 Transfer of franchise agreement Clause 25 (6) A franchisor must not unreasonably revoke the franchisor’s consent to the transfer of a franchise agreement. Note: A franchisor may reasonably revoke the franchisor’s consent to the transfer of a franchise agreement in the circumstances provided by subclause (6A). Civil penalty: 600 penalty units. Circumstances in which franchisor’s consent may reasonably be withheld or revoked (6A) A franchisor may reasonably withhold consent, or reasonably revoke consent, to the transfer of a franchise agreement in the following circumstances: (a) the proposed transferee is unlikely to be able to meet the financial obligations that the proposed transferee would have under the franchise agreement; (b) the proposed transferee does not meet a reasonable requirement of the franchise agreement for the transfer of the franchise agreement; (c) the proposed transferee does not meet the selection criteria of the franchisor; (d) the proposed transferee does not agree, in writing, to comply with the obligations of the franchisee under the franchise agreement; (e) the franchisee has not paid or made reasonable provision to pay an amount owing to the franchisor; (f) the franchisee has not remedied a breach of the franchise agreement; (g) the franchisor has not received from the proposed transferee a written statement that the transferee has received, read and had a reasonable opportunity to understand the disclosure document and this code. Paragraphs (a) to (g) do not limit the circumstances in which a franchisor’s consent may be reasonably withheld or revoked. Definition (7) In this clause: transferee means a franchisee who seeks to acquire a franchise business through the transfer of the franchise agreement. 34 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Franchise agreements Part 3 Termination of franchise agreement Division 5 Clause 26 Division 5—Termination of franchise agreement 26 Termination—cooling off after entering into new franchise agreement (1) A franchisee may terminate a franchise agreement within 14 days after entering into the agreement. (1A) Subclauses (1B) and (1C) apply if, immediately before the franchise agreement is entered into: (a) there is a proposal that the franchisor, or an associate of the franchisor: (i) lease premises for the franchised business to the franchisee; or (ii) allow the franchisee to occupy premises for the franchised business under a right (an occupancy right) other than a lease; and (b) the lease or occupancy right is not in force. (1B) The franchisee may terminate the franchise agreement within 14 days after receiving from the franchisor or associate: (a) the first document setting out the terms of the proposed lease or occupancy right; or (b) any later document setting out the terms of the proposed lease or occupancy if the terms are not substantially identical to the terms set out in the first document (excluding changes to the terms that were requested by the franchisee). (1C) The franchisee may terminate the franchise agreement within 14 days after entering into the lease or being granted the occupancy right if, before entering into the lease or being granted the occupancy right, the franchisee did not receive from the franchisor or associate a document setting out terms of the proposed lease or occupancy right that are substantially identical to the actual terms of the lease or occupancy right (excluding changes to the actual terms of the lease or occupancy right that were requested by the franchisee). (1D) Subclauses (1), (1B) and (1C) do not limit one another. Note: Those subclauses do not provide for the franchisee to terminate another agreement with the franchisor (such as a lease of premises from the franchisor) or an agreement with anyone else. (2) Subclauses (1), (1B) and (1C) do not apply to: (a) the renewal of an existing franchise agreement; or (b) the extension of the term or scope of an existing franchise agreement; or (c) the transfer of a franchise agreement that does not involve entry into a new franchise agreement between the transferee and the franchisor. Note: Clause 26A deals with cooling off after such a transfer. (3) If the franchisee terminates an agreement under subclause (1), (1B) or (1C), the franchisor must, within 14 days, repay all payments (whether of money or of other valuable consideration) made by the franchisee to the franchisor connected with the agreement. Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 35 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 3 Franchise agreements Division 5 Termination of franchise agreement Clause 26A Civil penalty: 600 penalty units. (4) However, the franchisor may deduct from the amount repaid under subclause (3) the franchisor’s reasonable expenses if the expenses or their method of calculation have been set out in the agreement. 26A Termination—cooling off after transferring franchise agreement (1) This clause applies if a franchise agreement is transferred between a person (the old franchisee) who was the franchisee under the agreement and a person (the new franchisee) who becomes the franchisee for the purposes of the agreement without a new franchise agreement being entered into by the new franchisee and the franchisor. Note: Clause 26 deals with a transfer that involves a new franchise agreement being entered into by the franchisor and the person to whom the transfer was made by the old franchisee. (2) The new franchisee may, by written notice given to the old franchisee and the franchisor in accordance with subclause (3), do all of the following: (a) cease to be the franchisee for those purposes; (b) if the old franchisee can become the franchisee for those purposes again— cause the old franchisee to do so; (c) if there was an agreement (the transfer agreement) between the new franchisee and the old franchisee for the purposes of the transfer— terminate the transfer agreement. (3) A notice under subclause (2) must be given within whichever of the following periods ends earlier: (a) the period of 14 days starting on the day after the new franchisee becomes the franchisee for the purposes of the franchise agreement; (b) the period ending on the day the new franchisee takes possession and control of the franchised business. Refunds from franchisor to new franchisee (4) If, by notice given under subclause (2), the new franchisee ceases to be the franchisee for the purposes of the franchise agreement, the franchisor must, within the period of 14 days starting on the day after the notice was given, repay all payments (whether of money or of other valuable consideration) made by the new franchisee to the franchisor under the franchise agreement. Civil penalty: 600 penalty units. (5) However, the franchisor may deduct from the amount repaid under subclause (4) the franchisor’s reasonable expenses if the expenses or their method of calculation have been set out in the franchise agreement. 36 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Franchise agreements Part 3 Termination of franchise agreement Division 5 Clause 26B Refunds from old franchisee to new franchisee (6) If, by notice given under subclause (2), the new franchisee terminates the transfer agreement, the old franchisee must, within the period of 14 days starting on the day after the notice was given, repay all payments (whether of money or of other valuable consideration) made by the new franchisee to the old franchisee under the transfer agreement. Civil penalty: 600 penalty units. (7) However, the old franchisee may deduct from the amount repaid under subclause (6) the old franchisee’s reasonable expenses if the expenses or their method of calculation have been set out in the transfer agreement. 26B Franchisee may propose termination at any time (1) A franchisee may, at any time, give the franchisor a written proposal for termination of their franchise agreement on the terms specified in the proposal, despite the agreement. The proposal must set out the reasons for the proposed termination. (2) If the franchisor is given a proposal under subclause (1), the franchisor must give the franchisee a substantive written response to the proposal within 28 days. Note: If the response is to refuse to terminate, or to refuse to agree to terminate, the franchise agreement on the terms proposed, a dispute may arise. Under clause 35, the dispute can be dealt with under Division 3 of Part 4. (3) If the franchisor has given the franchisee a substantive written response to a proposal (the earlier proposal) under subclause (2), the franchisor is not required to give the franchisee another response to that proposal. (4) However, if the franchisee gives the franchisor another written proposal (the later proposal) for termination of their franchise agreement for a different reason from the reason given for the earlier proposal, the franchisor must comply with subclause (2) in relation to the later proposal. (5) If the franchisor’s response is to refuse to terminate, or to refuse to agree to terminate, the franchise agreement on the terms proposed, the response must include the reasons for the refusal. Note: Each party to a franchise agreement is under an obligation to act in good faith in relation to the agreement (see clause 6). (6) This clause is not intended to otherwise limit the rights or obligations of the franchisor or franchisee under a law of the Commonwealth or a State or Territory or under the franchise agreement. 27 Termination—breach by franchisee (1) This clause applies if: (a) a franchisee breaches a franchise agreement; and (b) the franchisor proposes to terminate the franchise agreement. Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 37 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 3 Franchise agreements Division 5 Termination of franchise agreement Clause 28 (2) The franchisor must: (a) give to the franchisee reasonable notice, in writing, that the franchisor proposes to terminate the franchise agreement because of the breach; and (b) tell the franchisee what the franchisor requires to be done to remedy the breach; and (c) allow the franchisee a reasonable time to remedy the breach. Civil penalty: 600 penalty units. (3) For paragraph (2)(c), the franchisor does not have to allow more than 30 days. (4) If the breach has been remedied in accordance with paragraphs (2)(b) and (c), the franchisor must not terminate the franchise agreement because of the breach. Civil penalty: 600 penalty units. (4A) Subclauses (2) and (4) do not prevent the franchisor from exercising a power under the agreement to terminate the agreement if, at the time of the termination, the franchisor and franchisee agree to the termination. (5) Part 4 (resolving disputes) applies in relation to a dispute arising from termination under this clause. 28 Termination—no breach by franchisee (1) This clause applies if: (a) a franchisor terminates a franchise agreement: (i) in accordance with the agreement; and (ii) before it expires; and (iii) without the consent of the franchisee; and (b) the franchisee has not breached the agreement. (2) For subparagraph (1)(a)(iii), a condition of a franchise agreement that a franchisor can terminate the franchise agreement without the consent of the franchisee is not taken to be consent. (3) Before terminating the franchise agreement, the franchisor must give reasonable written notice of the proposed termination, and reasons for it, to the franchisee. Civil penalty: 600 penalty units. (4) Part 4 (resolving disputes) applies in relation to a dispute arising from termination under this clause. 29 Notice of termination by franchisor on particular grounds (1) This clause applies if a franchise agreement gives the franchisor power to terminate the agreement on any of the following grounds: (a) the franchisee no longer holds a licence that the franchisee must hold to carry on the franchised business; 38 Compilation No. 9 Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 Registered: 15/11/2022 Franchising Code of Conduct Schedule 1 Franchise agreements Part 3 Termination of franchise agreement Division 5 Clause 29 (b) the franchisee becomes bankrupt, an insolvent under administration or a Chapter 5 body corporate; (c) the franchisee is a company that is deregistered by the Australian Securities and Investments Commission; (d) the franchisee voluntarily abandons the franchised business or the franchise relationship; (e) the franchisee is convicted of a serious offence; (f) the franchisee operates the franchised business in a way that endangers public health or safety; (g) the franchisee acts fraudulently in connection with the operation of the franchised business. Franchisor must give 7 days’ notice of proposed termination (2) The franchisor must not terminate the agreement because of a ground mentioned in subclause (1) unless the franchisor has given the franchisee 7 days’ written notice of the proposed termination and the ground for it. Civil penalty: 600 penalty units. (3) However, clauses 27 and 28 do not prevent the franchisor from exercising the power under the agreement to terminate the agreement if the franchisor has not met the requirements of subclause 27(2) or subclause 28(3). Note: Those requirements include giving reasonable written notice of the termination to the franchisee. Rapid appointment of ADR practitioner or arbitrator for dispute over proposed termination (4) If the franchisor gives the franchisee written notice of the proposed termination and the franchisee tells the franchisor, in writing under subclause 40A(1) or a corresponding provision of the franchise agreement, about a dispute relating to the proposed termination then: (a) despite subclause (2), the franchisor must not terminate the agreement until after the end of 28 days after the notice was given; and (b) despite subclauses 40A(3), (4) and (5) or corresponding provisions of the franchise agreement: (i) the franchisee may refer the matter to an ADR practitioner for an ADR process if the franchisee and franchisor do not agree promptly how to resolve the dispute; and (ii) either the franchisee or the franchisor may request the Ombudsman to appoint an ADR practitioner for the ADR process relating to the dispute if the franchisee and franchisor do not agree promptly on who should be the ADR practitioner; and (iii) if requested, the Ombudsman must appoint an ADR practitioner as soon as practicable; and Competition and Consumer (Industry Codes—Franchising) Regulation 2014 Compilation No. 9 Compilation date: 11/11/2022 Authorised Version F2022C01111 registered 15/11/2022 39 Registered: 15/11/2022 Schedule 1 Franchising Code of Conduct Part 3 Franchise agreements Division 5 Termination of franchise agreement Clause 29 (c) despite paragraph 43B(4)(a), the Ombudsman must appoint an arbitrator for the dispute as soon as practicable after receiving a request from the parties to the franchise agreement to do so. Requiring franchisee to cease operating franchised business because of ground in subclause (1) (5) If the franchise agreement provides for the franchisor to take act

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