The Franchising Code: A Practical Guide for Commercial and Franchise Lawyers

Franchise agreements sit at the intersection of contract law, consumer protection and a genuinely specific regulatory regime, and the Franchising Code of Conduct is where all three meet. For commercial and franchise lawyers, understanding exactly what the Code requires, not just in broad terms but at the level of specific obligations, is core practice knowledge rather than a niche specialty, and the kind of subject matter worth building into ongoing commercial law CPD programs regardless of how familiar the area already feels.

What disclosure obligations does the Code impose?

Disclosure sits at the heart of the Code's purpose, and the obligations are detailed rather than general. A franchisor must give a prospective franchisee a disclosure document before the agreement is signed, generally with 14 days for the franchisee to consider it. The current disclosure document requirements include:

• Details of any significant capital expenditure the franchisee will need to undertake, including its timing, rationale, risks and anticipated benefits
• Expanded reporting where franchisees contribute to a specific purpose fund, covering marketing, cooperative, IT or conference funds
• Relevant information about the franchisor's convictions, insolvency history and any arbitration clauses affecting the franchise
• Clear disclosure supporting the franchisee's ability to assess the reasonable likelihood of making a return on their required investment 

A full 14-day disclosure period and cooling-off regime also applies whenever a franchisee enters a genuinely new or replacement agreement, as distinct from a simple renewal or transfer of an existing one, a distinction that matters more in practice than it might first appear.

What is a reasonable opportunity for return on investment?

This is one of the more consequential obligations in the current Code, and it's worth being precise about its scope. Franchise agreements must give franchisees a reasonable opportunity, not a guarantee, to earn a return on whatever investment the franchisor requires, including significant capital expenditure. The obligation doesn't promise franchisees profitability or shift commercial risk entirely onto the franchisor, but it does require the agreement's underlying commercial structure to genuinely support the possibility of a return, rather than setting terms that make a reasonable return effectively unattainable from the outset. Franchisors should review their financial models and franchise terms against this standard, and lawyers advising on new or amended agreements should treat it as a substantive drafting consideration, not a compliance formality to note and move past.

How does the Code's dispute resolution process work?

The Code sets out a structured, staged pathway rather than leaving parties to negotiate a process from scratch. In broad terms, it proceeds as follows:

• The complainant gives written notice describing the dispute, the outcome sought, and the action required to resolve it
• Both parties attempt in good faith to resolve the dispute directly, within a timeframe set by the Code
• If unresolved, either party may refer the matter to mediation, or to conciliation if both parties agree
• The Australian Small Business and Family Enterprise Ombudsman can assist with the process and appoint an alternative dispute resolution practitioner, without deciding the merits of the dispute itself
• Arbitration remains available, but only where the parties agree to it at the relevant time. 

Separately, the Code also includes a mechanism addressing disputes affecting multiple franchisees within the same network, requiring the franchisor to participate where it applies. None of this displaces a party's separate rights. Court proceedings, Australian Consumer Law claims and standard contractual remedies remain available alongside the Code's own dispute process rather than instead of it.

What other protections should lawyers keep front of mind?

A few further provisions round out the practical picture. Franchisors may terminate an agreement on seven days' notice in specific, prescribed circumstances, such as insolvency or a serious breach, though franchisees retain the right to challenge that termination through the courts if they consider it unjustified. Restraint of trade clauses face tighter limits than under the previous version of the Code, and certain unenforceable restraint provisions now carry civil penalties if used. Franchisors are also generally prevented from requiring franchisees to cover the franchisor's own legal costs in preparing an agreement or settling a dispute, except in narrowly defined circumstances.

Because these obligations sit across disclosure, financial structuring, dispute resolution and termination, advising well in this space rarely comes down to knowing one provision in isolation. It comes down to understanding how these pieces interact within a single franchise relationship, which is exactly the kind of depth that CPD points for law professionals are meant to support building over time, rather than something picked up in a single reading of the Code itself.