Franchising Code of Conduct Explained (Australia – 2025 Update)
- 2 days ago
- 6 min read
Franchising in Australia operates within one of the most structured regulatory environments in the world.
At the centre of that framework sits the Franchising Code of Conduct, a mandatory industry code established under the Competition and Consumer Act.
The Code regulates the relationship between franchisors and franchisees and establishes legal obligations designed to improve transparency and fairness within the sector.
In April 2025, Australia introduced a revised Franchising Code of Conduct, replacing the previous 2014 Code. The updated Code introduces several significant changes that affect how franchise systems must be structured and operated.
For businesses considering franchising their operations, understanding the Code is essential. Legal compliance is not simply a procedural requirement; it forms part of the structural architecture of the franchise system.
What Is the Franchising Code of Conduct?
The Franchising Code of Conduct is a mandatory industry code that regulates franchising in Australia.
The Code establishes rules governing the relationship between franchisors and franchisees. It sets out obligations relating to:
Disclosure of information to prospective franchisees
Franchise agreements
Marketing funds
Dispute resolution
Termination rights
Good faith obligations
The purpose of the Code is to ensure that prospective franchisees receive sufficient information to make informed investment decisions before entering into a franchise agreement.
The Code also seeks to balance the power dynamics that may exist between franchisors and franchisees.
The New Franchising Code (2025)
On 1 April 2025, Australia introduced a revised Franchising Code of Conduct.
This new Code replaced the previous 2014 version.
The reforms were introduced following several government reviews of the franchising sector that identified the need for stronger franchisee protections and clearer disclosure obligations.
Importantly, the new Code includes a transition period.
Timeline of Implementation
1 April 2025 The new Code commenced.
Some provisions took effect immediately.
1 April – 31 October 2025 Transition period where certain provisions are gradually implemented.
1 November 2025 All provisions of the new Code apply fully.
Franchisors must ensure their franchise systems comply with the updated requirements by this date.
For businesses designing new franchise systems today, it is generally advisable to structure documentation in accordance with the new Code from the outset.
Removal of the Key Facts Sheet
One of the notable changes introduced in the latest version of the Code is the removal of the Key Facts Sheet requirement.
Under the previous Code, franchisors were required to provide a Key Facts Sheet summarising key information about the franchise system.
This requirement has now been removed.
The reform was intended to simplify the disclosure process while retaining the core disclosure document requirements that provide more detailed information.
Prospective franchisees must still receive a comprehensive disclosure document before entering into a franchise agreement.
Reasonable Opportunity to Make a Return
One of the most significant changes introduced by the new Code is the requirement that franchise agreements must provide franchisees with a reasonable opportunity to make a return on their investment.
This reform addresses concerns raised during government reviews about franchisees being unable to recover their investment due to the structure of certain franchise agreements.
Importantly, the requirement does not guarantee profitability.
Instead, it means the franchise agreement must be structured in a way that provides a realistic opportunity for the franchisee to recover their investment over the life of the agreement.
This change has important implications for franchisors when designing their franchise systems.
Factors such as franchise term length, capital expenditure requirements and franchise economics must now be carefully considered.
Disclosure Requirements
Disclosure remains one of the central elements of the Code.
Franchisors must provide prospective franchisees with a disclosure document that contains detailed information about the franchise system.
This document allows prospective franchisees to evaluate the opportunity before making an investment.
Disclosure documents typically include information about:
The franchisor’s business history
The financial commitments required from franchisees
Ongoing fees and royalties
Litigation history
The number of existing franchisees
The disclosure document must be updated annually and provided to prospective franchisees before a franchise agreement is signed.
Significant Capital Expenditure
Another important reform relates to significant capital expenditure requirements.
Franchisors must provide clearer information about situations where franchisees may be required to undertake significant capital expenditure during the term of the franchise agreement.
This ensures prospective franchisees understand potential financial obligations before entering into the agreement.
For example, franchisors may require franchisees to upgrade premises, equipment or branding as the network evolves.
Under the new Code, these requirements must be disclosed more clearly.
Compensation for Early Termination
The updated Code also introduces provisions relating to compensation in certain early termination scenarios.
For example, compensation provisions may apply where a franchisor:
Exits the Australian market
Restructures the franchise network
Changes the distribution model
These provisions aim to address situations where franchisees lose their investment due to decisions made at the franchisor level.
Marketing Funds and Specific Purpose Funds
Many franchise systems operate marketing funds that collect contributions from franchisees to support brand marketing initiatives.
The updated Code introduces additional rules governing specific purpose funds, which are funds collected for defined purposes.
These provisions will apply from 1 November 2025.
Franchisors must ensure transparency regarding how these funds are used.
This helps ensure franchisees understand how their contributions support the franchise network.
Good Faith Obligations
The Code requires franchisors and franchisees to act in good faith in their dealings with each other.
Good faith generally means acting honestly, cooperatively and without undermining the legitimate interests of the other party.
This principle applies to:
Negotiations
Dispute resolution
Contract performance
Good faith obligations play an important role in maintaining constructive relationships within franchise networks.
Dispute Resolution
The Code establishes procedures for resolving disputes between franchisors and franchisees.
These procedures encourage disputes to be resolved through structured processes rather than litigation.
The process generally includes:
Written notice of the dispute
Attempts at negotiation
Mediation where necessary
The goal is to resolve conflicts efficiently while preserving the ongoing business relationship.
Why Compliance Matters
Compliance with the Franchising Code of Conduct should never be treated as a box-ticking exercise.
For franchisors, compliance forms part of the broader structural integrity of the franchise system.
Franchise systems that integrate legal compliance into their design are generally more stable and sustainable.
Conversely, franchise systems that treat legal obligations as an afterthought often encounter disputes, regulatory scrutiny and reputational damage.
Building a franchise system that aligns with the Code from the outset reduces these risks.
So What?
The Franchising Code of Conduct plays a central role in shaping the Australian franchising landscape.
The 2025 reforms introduce stronger franchisee protections and clearer obligations for franchisors.
For founders considering franchising their business, understanding the Code is essential.
Legal compliance should be integrated into the broader architecture of the franchise system alongside operational systems, financial modelling and recruitment strategies.
When these elements are properly aligned, franchising becomes a far more stable and sustainable pathway to growth.
Frequently Asked Questions
What is the Franchising Code of Conduct?
The Franchising Code of Conduct is a mandatory industry code that regulates the relationship between franchisors and franchisees in Australia. It sets rules around disclosure, franchise agreements, dispute resolution and other aspects of franchising.
When did the new Franchising Code begin?
The remade Franchising Code commenced on 1 April 2025, replacing the previous 2014 Code. Some provisions apply immediately while others transition until 1 November 2025.
What is the “reasonable opportunity to make a return” rule?
The new Code requires franchise agreements to provide franchisees with a reasonable opportunity to recover their investment over the term of the agreement. This does not guarantee profits but ensures the structure of the agreement allows a realistic return.
Do franchisors still need to provide a Key Facts Sheet?
No. The Key Facts Sheet requirement has been removed under the remade Code. However, franchisors must still provide a detailed disclosure document to prospective franchisees.
What happens if a franchisor breaches the Code?
Breaches of the Franchising Code can result in penalties, enforcement action by regulators and potential legal disputes with franchisees.
Speak With a Franchise System Architect
Designing a franchise system that complies with Australian franchising law requires careful planning.
At Franchising Made Easy®, we help founders design franchise systems that are structurally integrated, commercially viable and compliant with the regulatory environment.
If you want to explore whether your business may be ready for franchising, speak with someone who has helped design franchise systems across multiple industries.
