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Franchisees to benefit from changes to Code of Conduct

FRANCHISEES be aware. There have been more amendments to the Franchising Code of Conduct, and they will come into effect on October 1.

Key amendments are the introduction of a shorter disclosure document for franchises with an estimated annual turnover of less than $50,000, and the removal of the requirement of a franchisee selling a franchised business to provide a disclosure document to a prospective buyer.

The Code still requires a mandatory disclosure of prescribed information to prospective franchisees and provides for mediation of disputes and a cooling off period.

Deacons Lawyers WA managing partner, and former president of the Franchise Council of Australia’s WA Chapter, John Groppoli said the primary purpose of the amendments was to recognise the difference in size between franchises.

“The amendments will seek to reduce the document burden that goes with growing a franchise for those with a turnover of less than $50,000 and has reduced the cost for business owners selling a franchised business,” he said.

“It’s quite common that any prospective franchisee looks at the financials of the business and this made disclosure documents a bit irrelevant.”

Despite the changes, Mr Groppoli believes there is still some work to be done on the Code to improve it.

Small Business Development Corporation managing director George Etrelezis said while the amendments appeared to make the purchase of a small franchise easier, it was important to fully assess the business opportunity before making a financial commitment.

“As part of your research it is important to gather as much information as you can on the franchise operation and its current operators,” Mr Etrelezis said.

“Another consideration is your suitability to the franchise’s business.

“I urge all potential franchisees to seek guidance before entering into a franchise.”

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