PHOTO: O*NO Legal Founder and Legal Strategist, Kristen Porter
Important changes to Australian franchise laws, introduced in July, will impact both franchisors and franchisees, regardless of expansion plans.
The new laws will apply to new franchisee agreements, as well as renewals, meaning old contracts will eventually be superseded, despite how long they’ve been in place.
O*NO Legal Founder and Legal Strategist, Kristen Porter, said the new laws were franchisee friendly, and designed to balance the power relationship between the two parties.
“The changes will increase the cost of administering franchisee agreements, putting more red tape in place, and increasing the civil penalties for non-compliance, so it’s critical that all franchisors are across the amendments.”“Essentially, the laws are almost classifying franchisees as consumers, with consumer protections put in place,” she said.
At a high level, the updated Franchise Code of Conduct includes increased protection for franchisees, enhanced disclosure requirements, and changes to the dispute resolution process.
The changes also cover:
- Termination
- Cooling off
- Costs
- Marketing fund
- Restraints
- Capital expenditure
- Variation of Franchise Agreement
Some of the more significant amendments relate to dispute resolution, termination, and restraints of trade following agreement terminations.
Dispute resolution
The new laws aim to allow for alternative dispute resolution processes, reducing the need for litigation in favour of mediation or conciliation processes.
“Often, franchisors will have an inhouse legal team that they can defer to in a dispute,” Ms Porter said.
“Whereas franchisees generally won’t have access to this, leaving them with hefty external legal costs, which can be unattainable for some businesses.
“This law aims to find a good outcome through commercial processes.
“With litigation, no one ever wins. Even if someone gets everything they wanted, by the end of the process, they still don’t feel like they’ve won, and it takes its toll both financially and emotionally.”
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