Franchising Code of Conduct amendments22 April 2008 Topics: Franchising
The Franchising Code of Conduct was amended effective from 1 March 2008.
The stated purpose of the amendments is to enhance franchisor accountability by requiring additional disclosure of information by franchisors at an early stage so prospective franchisees can make more informed decisions.
The amendments affect the timing and content of disclosure statements and there are now restrictions on certain provisions in franchise agreements.
Some of the amendments are as follows:
- The franchisor must give the franchisee a copy of the proposed franchise agreement as part of the initial disclosure requirements and the agreement the franchisee signs must be in the same terms. This means that, if changes are required, the franchisor will have to give the franchisee a copy of the amended agreement and the applicable time periods commence again.
- A franchisor must provide a franchisee with the disclosure document at least 14 days before a renewal or extension of the scope of an existing franchise agreement.
- Franchisors cannot require franchisees to sign agreements which provide that any verbal or written representations made before signing are excluded from the agreement. This amendment applies from 1 October 1998.
It is crucial franchisors critically examine their current franchising agreements and processes to ensure compliance with the amended Code.
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