Franchise Reform in Focus: What the 2024 Code Means for the Franchising Sector

The 2024 Franchising Code of Conduct, which commenced on 1 April 2025, marks a significant evolution in franchise regulation. Replacing the 2014 Code, the new framework stems from the 2023 Independent Review of the Franchising Code of Conduct (the Schaper Review), and aims to raise standards, improve fairness, and modernise compliance obligations across the sector.

Purpose of the Reforms

The reforms are designed to:

• Address power imbalances between franchisors and franchisees;

• Simplify and strengthen disclosure requirements;

• Promote transparent and fair conduct;

• Establish clearer dispute resolution mechanisms; and

• Ensure the regulatory framework remains fit for purpose as the sector evolves.

Who Is Affected?

• Franchisors must review and update all franchise documents, disclosure procedures, and fund administration practices to ensure compliance.

• Franchisees and prospective franchisees benefit from improved transparency, stronger protections, and greater certainty in contractual arrangements.

• Master franchisors are generally excluded from direct obligations to sub franchisees, unless they are a party to the relevant agreement.

Key Changes Under the 2024 Code

1. Restraint of Trade Reforms

   • Franchisors may no longer enforce restraint of trade clauses where the franchise agreement is not renewed or extended, unless the franchisee was in serious breach at the time of expiry. This reform promotes fair competition and enables franchisees to continue operating independently where appropriate.

2. Compensation for Early Termination & Return on Investment

   • Franchise agreements must now provide for compensation if the franchisor terminates early without franchisee fault, and must also include provisions as to how this compensation is to be calculated.

   • The Code also requires franchise agreements to offer franchisees a reasonable opportunity to recoup their investment over the term of the agreement.

     
     

3. Enhanced Disclosure Framework

   • The separate key facts sheet has been removed. All critical information is now consolidated into the disclosure document.

   • Franchisors must disclose whether significant capital expenditure will be required and provide specific details about its purpose, timing, benefits, and risks.

   • Updated disclosure requirements now include Fair Work contraventions, corporate control changes, and relevant litigation.

4. Cooling-Off and Payment Protections

   • A 14-day cooling-off period applies not only to new agreements, but also now to transfers of existing agreements.

   • Franchisees can request the repayment of any amounts paid during the cooling-off period, and franchisors must comply within 14 days.

5. Stronger Good Faith Obligations

   • Clauses that attempt to waive or limit the obligation to act in good faith are now expressly prohibited. Parties must act in good faith in all dealings under or in relation to the Code and the franchise agreement, including during negotiations and dispute resolution.

6. Dispute Resolution Enhancements

   • The Australian Small Business and Family Enterprise Ombudsman can now publish the names of franchisors who refuse to engage in alternative dispute resolution.

7. Increased Penalties

   • Higher-tier penalties of up to $10 million (or 10% of turnover) apply to serious contraventions, such as failure to disclose materially relevant facts or breaching Fair Work provisions.

   • Standard breaches attract penalties of up to 600 penalty units.

Commencement and Transitional Provisions

The 2024 Code applies to Franchise agreements entered into, renewed, or extended on or after 1 April 2025. Existing agreements remain subject to the 2014 Code unless they are subsequently renewed or varied, although certain provisions (e.g. fund reporting and disclosure updates) may still apply.

Next Steps for Franchisors

It is vital that all franchisors undertake a comprehensive review of their existing franchise agreements and disclosure documents, to ensure that the comply with the changes introduced to the 2024 Code.

With deep expertise in franchising law, our team has been assisting franchisors to navigate these changes and ensure their documentation remains fully compliant. If you’re a franchisor seeking timely, practical advice, we’d be pleased to help — reach out to our commercial team today.

This article is intended for general information purposes only and does not constitute legal advice. You should not rely on the content of this article as a substitute for obtaining detailed legal advice.

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