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Code: what you should know

THE new Franchising Code of Conduct has a number of requirements that will benefit both franchisees and franchisors, says Australian Competition and Consumer Commission small business officer Siobhan O’Gara.

“The disclosure requirements will ensure business people going into franchise arrangements will be prepared with the best information available to them from which to make informed decisions,” she said. “And that in turn should reduce the level of dispute.”

Ms O’Gara said another important aspect of the new code was the dispute resolution provisions.

“The parties now have to look at mediation. It doesn’t preclude taking legal action, but the mediation procedure must be entered into first,” she said.

“Small businesses have limited resources in terms of time, personnel and finance and mediation will help them avoid litigation procedures.

“Any agreement or franchise arrangement entered into prior to the introduction has to comply with the dispute resolutions provisions, so it’s retroactive.

“Another important provision is franchisees can now associate — there can be no provision in a franchise agreement forbidding franchisees from contacting each other, liaising or meeting.

“One of the items in the disclosure document provided by the franchisor is the names and details of all franchisees must be provided, so a new franchisee has the option of contacting existing franchisees.

“There’s also a ‘cooling off’ period which only applies to new franchise agreements. It does not apply to the transfer, extension or renewal of a franchise agreement.

“It allows prospective franchisees time to get advice and gives them the opportunity to think about it after the initial excitement.”

“Franchisees must be provided with copies of leases where they are leasing from the franchisor, or an associate of the franchisor,” Ms O’Gara said.

“Franchisees who are entering into a franchise agreement must also provide a statement signed to the franchisor saying that they have been advised to seek independent legal advice,” she said.

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