What Are The Australian Franchise Law And Regulations 2022?
March 15, 2022
The Australian Government, on June 1, 2021, introduced the Competition and Consumer Amendment Regulations 2021 or the “Regulations”. It was done to enhance the transparency in the franchising field and curb the exploitation of the franchisees.
If you are a franchisee and need to settle a dispute with your franchisor, you should consult franchising lawyers Perth to guide you with your case.
Let’s now discuss the amendments and new provisions introduced in the existing Franchising Code of Australia.
Dispute Resolution And Handling Of Complaints
- The new Regulations seek to resolve the imbalances in the negotiation of power and resources between franchisees and franchisors in dispute resolution.
- It is accomplished by broadening the dispute resolution avenues available for the parties and granting dispute resolution assistance functions like receiving details regarding disputes dealt with under the Franchise Code and keeping lists of ADR (alternative dispute resolution) practitioners upon the Australian Small Business and Family Enterprise Ombudsman.
- Under the Franchising Code, the Regulations further add arbitration and conciliation as dispute resolution mechanisms, making mediation predominant as a dispute resolution mechanism.
- For arbitration, mediation and conciliation, all the involved parties have to be in attendance. Failing to attend will lead to a civil penalty provision, with the maximum penalty being $ 66,600. Experienced commercial lawyers can help you with a mediation process with your franchisor.
- The new 40B clause brings in a procedural framework for initiating and conducting dispute resolution processes that have multiple franchises with similar disputes with a franchisor. The Regulations state that the franchisees may discuss with each other to reach decisions whether or not to settle their disputes in the same way in spite of any confidentiality requirements included in their franchise agreements.
- The Explanatory Statement states that this subclause makes sure that clause 40B is in alignment with the overarching policy of covering franchisees’ abilities to openly connect with other franchisees for discussing the resolution of common disputes with a franchisor.
- So, a franchisor needs to be aware of this provision, as any confidential information conveyed to one franchisee can be passed on to other franchisees. Also, clause 40B(6) requires a franchisor to attend a multi-party dispute resolution process and even attempt to settle the dispute, although the franchisor objects to the appointment of the ADR practitioner or conduct of a single ADR process.
Disclosure and Consent to Transfer
- The Regulations establish a new document and key facts sheet that a franchisor has to provide to a potential franchisee. After signing a franchise agreement, the franchisor has to update the key facts sheet within four days after each financial year’s end, which is subject to limited exceptions.
- According to the Regulations, the franchisors will also be obligated to disclosure upon receiving a request to agree to a franchise transfer. Franchisors will have to provide the disclosure 14 days prior to giving consent.
- The Regulations further add points in the Franchise Disclosure Document regarding the disclosure requirements. They relate to the receiving and distribution of supplier rebates under paragraphs 10.1(j) and (k) of Annexure-1 of the Franchising Code. A franchise solicitor should be consulted to understand the various complexities of the disclosure document.
- The disclosure document needs to specify whether or not the franchisor, master franchisor, or any associate of the franchisor will get a rebate or other benefits from a goods and services supplier of the franchisee. If yes, several details need to be disclosed, like if the rebate or other financial benefits are directly or indirectly shared with the franchisee.
Franchise Agreements Termination
- Under the Regulations, a franchisee’s rights to terminate franchise agreements have been expanded. The franchisees also receive greater protection regarding termination by the franchisors under special circumstances. You should discuss with your franchising lawyer the termination changes brought in by the Regulations.
- The new clause 26(1) extends the cooling-off period following the entry into a franchise agreement from 7 days to 14 days. Also, before this, the cooling-off period didn’t apply to an existing franchise agreement’s transfer from an outgoing to an incoming franchisee. The new clause 26A expands the cooling-off rights to new incoming franchisees who are transferred to the existing franchise agreements.
- Another clause 26B under the Regulations states that the franchisees may, at any time, provide the franchisors with a written proposal for terminating their franchise agreements according to the terms mentioned in the proposal in spite of the agreement.
- The franchisors then need to give a substantive written response in reply to the proposal for premature termination to the franchisees within 28 days, mentioning reasons if they reject the request.
- A 7-day notice period has also been introduced for the franchisors if they wish to terminate the franchise agreement under special circumstances, according to clause 29. So, during this period, the franchisees will be able to serve a dispute notice and even trigger a dispute resolution process before the termination.
For resolving a dispute with your franchisor, you can approach one of the leading law firms in Perth, the Commercial Lawyers Perth WA, who have experienced franchise solicitors who would be better in preparing your case.