A. New Disclosure Obligations for Franchisors under the 2025 Franchising Code of Conduct

B. New Franchising Code: Time to Refresh Your Disclosure Documents

On 1 April 2025, the new Franchising Code of Conduct commenced, significantly changing the way franchisors must manage their disclosure obligations. These reforms are intended to improve transparency, protect franchisees, and raise industry standards.

Annual Review and Disclosure Updates

Franchisors are required to review and update their disclosure documents at least once each year and throughout the year if material changes arise.

• Agreements before 1 April 2025 – the annual update must be completed within four months after the end of the franchisor’s financial year (for example, by 31 October if the year ends on 30 June).
• Agreements on or after 1 April 2025 – the update must be made within four months of the start of the franchisor’s financial year (for example, by 31 October if the year begins on 1 July).

Failure to disclose or any misrepresentation can lead to infringement notices, court penalties, and enforcement action by the ACCC.

New Disclosure Obligations from 1 November 2025

There is a transition period before some key obligations commence. From 1 November 2025, franchisors must include in their disclosure documents:

• Details of significant capital expenditure required of franchisees, including timing, rationale, risks, and anticipated benefits.
• Expanded reporting and disclosure when franchisees contribute to a specific purpose fund (including marketing, cooperative, IT or conference funds).

Key Changes in the New Code

The Treasury’s summary of the new Code highlights broader reforms that franchisors should be aware of

Code Changes:

• Expanded civil penalties – nearly all obligations are now subject to penalties of up to 600 penalty units.
• New definitions – including “specific purpose funds” which consolidate marketing, cooperative, IT, and similar funds.
• Purpose of the Code – now expressly focused on improving industry standards and ensuring fair dispute resolution.
• ASBFEO powers – the Ombudsman can now publicise franchisors who refuse to engage in dispute resolution.
• Key Facts Sheet removed – franchisors will no longer provide or upload these to the Disclosure Register as of 1 April 2025.
• Restraint of trade – franchisors cannot enter into agreements with certain unenforceable restraint clauses, with civil penalties applying.
• Early termination compensation – agreements must provide compensation to franchisees in certain early termination scenarios.
• Return on investment – agreements must ensure franchisees have a reasonable opportunity to earn a return on their required investment.
• Termination for serious breach – franchisors may terminate with 7 days’ notice in prescribed cases, though franchisees retain rights to challenge termination in court.
• Franchise Disclosure Register – from 1 April 2025, additional information must be disclosed (e.g., convictions, insolvency, arbitration clauses).

Transition and Practical Steps

• The new Code applies to agreements entered into, renewed, extended or transferred on or after 1 April 2025.
• Some disclosure obligations have a grace period until 1 November 2025.
• Existing agreements remain governed by the old Code until a renewal, extension, or transfer occurs.

What This Means for Franchisors

Franchisors should not delay in:

• Reviewing and updating disclosure documents in line with the new requirements;
• Ensuring franchise agreements contain provisions for capital expenditure, compensation, and reasonable return on investment by the November deadline; and
• Seeking advice on Code compliance, tailored to their financial year and franchise system.