The Australian Competition and Consumer Commission has welcomed the launch of the Franchising Code of Conduct today.
Elements of the code are effective from 1 July, 1998 with the remainder effective from 1 October. 'The development of the code strengthens the franchise industry by providing clear rules for all involved,' ACCC Chairman, Professor Allan Fels, said today.
Franchising has proved to be a popular 'step up' into small business - but has also been fraught with difficulties. The code will require franchisors to provide a disclosure document to prospective franchisees and existing franchisees on renewal and extension of an agreement and where the franchisor materially changes an existing franchise agreement.
It imposes obligations on franchisors to keep franchisees informed of specified information within their knowledge that may have an adverse impact on the franchisee or the franchise system. It introduces a mandatory dispute resolution process and deals with matters such as the variance, sale or termination of an agreement.
Introduction of the code will require some adjustment on the part of franchisors and its impact will vary between franchise systems. Franchisors which previously complied with the voluntary Code are likely to incur significantly lower disruption during the transition to the mandatory Code.
The ACCC will be responsible for the enforcement of the code and breaches will invoke sanctions under the Trade Practices Act 1974.