Franchising is one of the most active and fast-growing business models in Australia. Whether you are considering purchasing a franchise or planning to expand your business through franchising, understanding the legal framework is essential. At Corporate Lawyers Perth, we help businesses and investors navigate the legal requirements that govern franchise relationships. With regulations designed to protect fairness, transparency, and ethical conduct, franchising in Australia is highly structured compared to many other jurisdictions.
In this comprehensive guide, we explain the key laws that regulate franchising arrangements in Australia and outline why working with experienced franchise lawyers in Perth is crucial before entering into any franchise agreement.
Understanding the Legal Framework for Franchising in Australia
Australia has a robust legal framework to regulate the conduct of franchisors and franchisees. These laws ensure that both parties maintain fair dealings, transparency, and a balanced commercial relationship. The regulatory framework includes:
- The Franchising Code of Conduct
- The Competition and Consumer Act 2010 (CCA)
- Australian Consumer Law (ACL)
- Contractual obligations set out in the franchise agreement
Together, these laws form the foundation of franchising in Australia and provide clear protections for current and prospective franchisees.
Franchising Code of Conduct – The Core Regulation
The Franchising Code of Conduct is a mandatory industry code enforced under the Competition and Consumer Act 2010. Every franchise business operating in Australia must comply with it.
Key Components of the Franchising Code
1. Disclosure Obligations
Franchisors must provide a detailed Disclosure Document at least 14 days before signing a franchise agreement. This includes financial information, litigation history, fees, costs, and risks.
2. Franchise Agreement Rules
The Code sets rules regarding the terms, conduct, and operation of franchise agreements. It ensures contracts are clear, fair, and aligned with national standards.
3. Good Faith Requirement
Both franchisor and franchisee must act in good faith throughout the franchise relationship. This includes honest communication, fairness in negotiations, and ethical decision-making.
4. Cooling-Off Period
Franchisees have a 14-day cooling-off period, providing time to reconsider their decision after signing.
5. Dispute Resolution Requirements
The Code outlines structured mediation processes for resolving disputes.
As a leading franchise law firm, we guide clients through these mandatory requirements to avoid non-compliance.
Competition and Consumer Act 2010 (CCA) and Franchise Compliance
The Competition and Consumer Act 2010 ensures that franchisors and franchisees follow fair business practices. It also prohibits misleading or deceptive conduct, unfair contract terms, and anti-competitive behaviour.
Under the Act, the ACCC (Australian Competition and Consumer Commission) monitors franchise operations and can investigate breaches. Penalties for non-compliance can be significant, making legal guidance essential.
At Corporate Lawyers Perth, we ensure our clients understand their obligations and avoid legal pitfalls under the CCA.
Understanding Franchise Agreements Under Australian Law
A franchise agreement is a legally binding contract that defines the relationship between franchisor and franchisee. While each agreement varies by business model, most contracts include:
- Franchise fees and ongoing payments
- Intellectual property rights
- Operational guidelines
- Territory rights
- Marketing fund obligations
- Training requirements
- Renewal and termination conditions
- Dispute resolution mechanisms
Because franchise agreements are often detailed and lengthy, reviewing them with qualified franchise lawyers in Perth ensures clarity and reduces risks. We help clients interpret complex clauses and understand their obligations before committing.
Disclosure Requirements for Franchisors
The Franchising Code requires franchisors to provide transparent and accurate information before entering into a franchise agreement. Key disclosures include:
- Financial history and performance
- Background of key personnel
- Fees, costs, and royalties
- Legal disputes involving the franchisor
- Marketing fund contributions
- Territory details
- Franchisee obligations
These disclosures allow franchisees to make informed decisions and avoid unexpected risks.
Dispute Resolution and Termination Rules
The Franchising Code sets clear guidelines for resolving disputes. If disagreements arise, the parties must first attempt mediation. The aim is to resolve issues without resorting to litigation.
The Code also covers:
- Grounds for terminating a franchise agreement
- Notice requirements
- Procedures for breach of contract
- Conditions for immediate termination
These protections ensure fairness and prevent unreasonable or sudden termination.
Why Work With Franchise Lawyers Perth?
Understanding Australian franchising laws can be complex. Working with a team like Corporate Lawyers Perth ensures that every step of the franchising process follows legal standards. We assist with:
- Reviewing franchise agreements
- Advising on compliance with the Franchising Code
- Assisting with negotiations
- Guiding franchisors in preparing compliant documents
- Supporting franchisees with due diligence
- Resolving disputes
Whether you are entering a franchise or establishing one, our expertise ensures a legally sound and successful outcome.
Conclusion
Franchising in Australia is governed by a robust legal framework designed to promote fairness, protect franchisees, and ensure compliance across the industry. With the Franchising Code of Conduct, the Competition and Consumer Act, and detailed disclosure obligations, understanding your rights and responsibilities is essential before entering into any franchise arrangement.
At Corporate Lawyers Perth, we provide clear guidance, help minimise legal risks, and ensure our clients fully understand their obligations under Australian franchise law. With experienced franchise lawyers in Perth, you can make informed decisions and build a strong foundation for your franchise journey.
How does ACL protect franchisees?
The Australian Consumer Law (ACL) protects franchisees by ensuring they are not misled or subjected to unfair contract terms. It requires franchisors to provide accurate information, act fairly, and avoid deceptive conduct. ACL also allows franchisees to seek remedies if they experience misleading statements, false promises, or unfair business practices.
Do franchisees have cooling-off rights in Australia?
Yes. Franchisees in Australia are given a 14-day cooling-off period under the Franchising Code of Conduct. This allows them to reconsider their decision after signing the agreement. If they choose to withdraw, they can do so within this period, although certain initial costs may not be refunded by the franchisor.
Why is the CCA important for franchises?
The Competition and Consumer Act (CCA) is important because it sets rules to ensure fairness and transparency in franchise dealings. It prevents anti-competitive behaviour, protects franchisees from misleading conduct, and supports fair contract terms. The CCA also empowers the ACCC to investigate and penalise franchisors who breach their legal obligations.
How does Australian Consumer Law apply to franchise relationships?
Australian Consumer Law applies to franchise relationships by ensuring both franchisors and franchisees follow fair trading rules. It requires honesty in advertising, prevents misleading claims, and bans unfair contract terms. ACL also gives franchisees the right to seek compensation if they suffer loss because a franchisor provided false or incomplete information.
