The Australian Government just put franchisors on notice. With a $7.1 million funding boost for the ACCC to enforce the Franchising Code of Conduct announced this week, the days of skating by with outdated agreements and questionable contract terms are numbered. Announced on Wednesday 18 March by the Albanese government, the funding is part of a broader government effort to protect small businesses and workers by cracking down on unfair practices in franchising. And with less than two weeks until the New Code takes effect, franchisors who haven’t updated their agreements, disclosure documents, and internal processes need to get moving—fast.
This is more than just a compliance headache. With the ACCC’s increased powers, franchisors who get it wrong could face significant penalties, legal action, and major damage to their reputation. Here’s what’s at stake.
Unfair Contract Terms – The Time for “One-Sided” Agreements is Over
Despite repeated warnings, we still see franchise agreements packed with clauses that just don’t hold up under today’s Unfair Contract Terms (UCT) laws. The ACCC’s December report made it clear: clauses that heavily favour franchisors without offering franchisees any protection or carveouts could be struck down or worse, result in hefty fines. We previously wrote about the topic of UCTs in Franchise Agreements here and here.
Some of the biggest red flags we keep seeing?
- Far-reaching indemnities that shift all the risk onto the franchisee, without any carve-outs or reciprocal clauses
- Clauses allowing franchisors to update the Manual whenever they want, without notice, and without restriction
- Unilateral set-off clauses that give franchisors all the power in financial disputes
- Obvious penalty clauses for breaches or early terminations, which courts won’t tolerate
After the Fuji decision, these types of terms are riskier than ever. The ACCC is paying attention, and with their new funding, they have the resources to act. If you’re still using these kinds of clauses, you need to fix them now before they land you in trouble.
The New Code Is (almost!) Here – Franchisors Who Haven’t Updated Their Documents Are Already Behind
The remade Franchising Code of Conduct comes into effect in just a matter of days, and it brings some significant changes. From mandatory new clauses to a revised disclosure document, franchisors must update their agreements to comply. We provided guidance on these new changes in our prior article here.
If you haven’t already made these updates, you’re playing with fire. Using an outdated agreement or disclosure document after the new Code takes effect will almost certainly put you in breach—not just of one provision, but several, including many carrying financial penalties.
At this point, franchisors who haven’t reviewed their documents need to act immediately. Relying on old paperwork after the deadline is a lawsuit waiting to happen.
DIY Contract Grants and Formation – A Recipe for Disaster
One of the most common (and costly) mistakes we see? Franchisors getting contract grants and formation wrong, including by DIY’ing it. The Franchising Code is highly prescriptive, especially when it comes to disclosure obligations—everything from earnings information to lease details, the application of the new “consideration period,” and when certain fees can be taken.
And it’s not just small, emerging brands making these mistakes. We see some big-name franchisors getting it wrong, proving that no one is immune.
The most common mistakes we see?
- Incomplete or inaccurate disclosure documents—which can lead to claims of misleading conduct
- Improper disclosure of earnings information
- Failing to disclose lease items correctly
- Failing to include the mandated wording concerning documentation fees
- Characterising deposits as non-refundable.
- Not getting the ‘reasonable opportunity’ written acknowledgement, or getting it at the wrong time
- Getting the consideration period wrong—which could mean your agreement isn’t legally enforceable.
With compliance failures now under a brighter spotlight than ever, franchisors can’t afford to get this wrong.
The Bottom Line: It’s Time to Get Code Compliant
Between the ACCC’s new funding, the upcoming Code changes, and increasing enforcement action, franchisors must take compliance seriously. The cost of inaction? Regulatory penalties, lawsuits, and a damaged reputation.
Now is the time to:
- Review and update franchise agreements—strip out any outdated or unfair terms before the ACCC does it for you.
- Ensure disclosure documents meet the new Code’s requirements—because using an outdated document is a guaranteed breach.
- Get expert advice to make sure you’re meeting all obligations and protecting your business.
Franchisors who ignore these warnings will pay the price—and with the government putting more money into enforcement, that price is only going up.
If your agreements aren’t compliant yet, fix them today. Because once the ACCC comes knocking, “I didn’t know” won’t be an excuse.