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Home > Franchisor > Franchise Regulations
Franchise regulations vary from country to country. Franchise regulations in Australia are considered globally as best practice and will be explored here.
The franchise sector in Australia is regulated by the Franchising Code of Conduct, a mandatory industry code under the Trade Practices Act (1974) and which is administered and enforced by the Australian Competition and Consumer Commission (ACCC).
The Franchising Code was the first national standard regulations of its kind in the world when introduced in July 1998. It has been amended twice since its introduction – once in 2001 to update some minor technical considerations, and most recently in March 2008 when changes to franchise disclosure requirements were introduced.
An inquiry into the Franchising Code which concluded in December 2008 recommended 11 key changes. The Australian Federal Government has now made a formal response to the recommendations, however final franchise regulations reforms are pending the outcome of an expert panel, due the end of February 2010.
The purpose of the Franchising Code of Conduct is to regulate the conduct of participants in the franchise sector toward one another. It covers three key areas:
Under the Code, franchisors are not required to pre-register with any statutory authority prior to franchising, but are expected to be operating in compliance with the Code at all times. A breach of the Code is a breach of the Trade Practices Act and therefore punishable by the remedies available under the Act.
Business owners considering franchising their businesses are urged to get advice from experienced franchise consultants, as well as experienced franchise lawyers and accountants.
The specific nature of the Franchising Code, and the cost of non-compliance, is such that franchise business owners and franchisors are encouraged to only deal with business, legal and accounting advisors with demonstrated franchising experience and expertise.
Download a free copy of the Franchising Code of Conduct.
Franchise sector regulation varies from country to country. Australia is considered best practice, so reviewing Australia's franchise regulations will give you an idea of the types of regulation which may apply. Franchise regulations compliance costs should also be considered.
Regulations that affect franchising in Australia are as follows:
Of these, only the Franchising Code of Conduct is specific to franchising. All other laws apply to both franchised and non-franchised businesses.
The Code is the only specific legislation to regulate the franchise sector in Australia.
It was most recently updated in March 2008. During 2008, separate inquiries in the states of Western Australia and South Australia, as well as a national inquiry, each commented on potential improvements to the Franchising Code. Of these, the national inquiry is the most significant as it has the greatest capacity to influence the Code, which is a Federal (not state) statute.
The national franchise inquiry was conducted by the Federal Parliamentary Joint Committee on Corporations and Financial Services from June to December 2008.
The terms of reference for the inquiry were to inquire and report on the operation of the Franchising Code of Conduct, and to identify, where justified, improvements to the Code.
The inquiry’s final report, Opportunity not Opportunism: Improving conduct in Australian Franchising, was provided to the Government on December 1, 2008. The report contained 11 recommendations as follows:
The inquiry report is currently under consideration by the Federal Government, which is yet to release its formal response. Should any or all of the 11 recommendations be accepted, amendments to the Franchising Code of Conduct will be needed to include the new changes. Read the Code inquiry report.
Like the Franchising Code of Conduct, the Oil Code is a mandatory industry code under the Trade Practices Act (1974), and is enforced by the Australian Competition and Consumer Commission (ACCC).
The Oil Code regulates the conduct of suppliers, distributors and retailers in the petroleum marketing industry – many of which are franchised - and aims to:
Improve transparency in wholesale pricing and provide better access to declared petroleum products at a published terminal gate price (TGP)
Assist industry participants to make more informed decisions when entering, renewing or transferring a fuel re-selling agreement by requiring the disclosure of specific information
Improve the operating environment for all industry participants by providing access to a cost-effective and timely dispute resolution scheme as an alternative to litigation
In some regards the Oil Code seeks to achieve similar outcomes to the Franchising Code of Conduct, particularly in relation to disclosure and dispute resolution.
But unlike the Franchising Code, which has no state equivalent and exists only as federal legislation, the Oil Code exists concurrently with state regulation of the petroleum industry in the states of Victoria and Western Australia.
The introduction of the Oil Code on 1 March 2007 included the repeal of two previous pieces of legislation: the Petroleum Retail Marketing Sites Act 1980; and the Petroleum Retail Franchise Act 1980.
View the complete Oil Code regulations.
The Trade Practices Act was introduced in 1974 and is one of the most comprehensive bodies of law in Australia. It aims to enhance the welfare of Australians by promoting competition and fair trading and providing consumer protection, and includes the relationships among suppliers, wholesalers, retailers, competitors and customers.
It applies to most corporations, sole traders and partnerships whose activities cross state boundaries (or take place within a territory), or are conducted by phone or post, or use radio or television. It real terms, the TPA covers almost all businesses operating in Australia. Where it is not applicable, relevant state Fair Trading legislation may apply instead.
Elements of the Act most relevant to franchising are as follows:
Of these, misrepresentation and unconscionable conduct (in addition to breaches of the Franchising Code of Conduct) are the most common contraventions by franchisors of the Trade Practices Act.
Additional information on the Australian Competition and Consumer Commission’s role in administering the Trade Practices Act, the Franchising Code of Conduct or the Oil Code is available on its website.
There is no Federal regulation of the relationship between landlords and tenants in retail and commercial premises in Australia. Such regulation exists at state level, and differs for each state.
The relevant legislation for each state is as follows:
In 2007, the Federal Productivity Commission considered the market for retail leases in Australia and it its final report, dated March 31, 2008, made eight key recommendations, which are summarised as follows:
These recommendations are yet to be adopted. The Productivity Commission’s report, The Market for Retail Tenancy Leases in Australia, is available for free online.
The Corporations Act sets out the laws dealing with companies in Australia at federal and state level, as well as some other business entities such as partnerships and managed investment schemes.
The Act regulates the formation and operation of companies, duties of officers, takeovers and fundraising. Any business operating in Australia as a company is bound by this legislation.
View a summary of the table of contents of the Act, as well as links to its complete sections. (The Act itself runs to several thousand pages).
In addition to the Trade Practices Act (1974), each state of Australia has its own set of Fair Trading laws which provide consumer protections similar to those available under the Act.
The state legislation is summarised as follows:
Australian Capital Territory
Fair Trading Act 1992
New South Wales
NSW Fair Trading Act 1987
Northern Territory
Consumer Affairs and Fair Trading Act
Queensland
Fair Trading Act 1989
South Australia
Fair Trading Act 1987
Tasmania
Fair Trading Act 1990
Victoria
Fair Trading Act 1999
Western Australia
Consumer Affairs Act 1971
A number of legislative instruments exist to protect intellectual property in Australia, the most significant of which are administered by a federal body, IP Australia. Legislation administered by IP Australia includes:
Australia is also a signatory to a number of international intellectual property agreements, including the Madrid System for the international registration of marks, the Trademark Law Treaty and others.
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