The Franchising Code of Conduct has been updated. Franchisors now have more power to terminate franchise agreements in serious cases—commonly called “special circumstances.” These changes expand the list of grounds for termination and introduce a new safeguard under section 58. This article breaks down what’s changed and how franchisors can act lawfully and strategically.
New Grounds for Special Circumstances Termination
Franchisors can terminate a franchise agreement on just 7 days’ written notice in certain exceptional cases. The Code already covered serious breaches like fraud, abandonment, or threats to public safety. But the recent amendments add three new grounds, with a clear focus on workplace and migration law breaches:
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(d) A court finds the franchisee committed a serious contravention of a Fair Work civil remedy provision
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(e) A court finds the franchisee breached section 245AAA, 245AAB or 245AAC of the Migration Act 1958 (relating to employing unlawful non-citizens)
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(g) The franchisee is convicted of an offence against any of those same sections of the Migration Act
These join six existing grounds, making nine in total. If you’re unsure whether a situation qualifies, it’s best to check in with a franchise lawyer early.
How Section 58 Works: The Dispute Notice Process
Not every special circumstance allows for immediate termination. Section 58 now requires franchisors to follow a standstill period in certain cases.
It applies where the franchisor wants to terminate for:
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Abandonment of the franchise or relationship
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Conduct endangering public health or safety
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Fraud relating to the franchise
Here’s the process:
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The franchisor gives a termination notice explaining the reason
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The franchisee then has 7 days to issue a dispute notice under section 72 (or a similar clause in the franchise agreement)
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If no dispute notice is received, termination can proceed after 7 days
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If the franchisee does dispute it, the franchisor must wait 28 days before terminating
Skipping this process can result in penalties of up to 600 penalty units. A smart franchisor will check their steps with a franchise lawyer before acting.
Using the Special Circumstances Provisions Wisely
These provisions are powerful—but high risk. Getting it wrong can damage the brand and trigger legal action. Here’s how franchisors can act with confidence and care.
1. Investigate First
Don’t rely on assumptions. Make sure you have solid evidence. This is crucial where the facts may be unclear—like allegations of fraud or abandonment.
2. Let the Franchisee Respond
Even when it’s not legally required, it’s often wise to hear the franchisee out. This can reduce disputes and show procedural fairness—something that counts if things end up in court.
3. Create a Termination Plan
Plan ahead. Before sending any notice, franchisors should prepare a brief internal plan covering:
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(a) What happens to any leases, licences or premises
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(b) How the termination will be communicated across the network, customers and suppliers
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(c) Whether legal advice is needed—especially from a franchise lawyer, if the facts are contested or section 58 applies
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(d) Whether the franchisor wants to exercise buy-back rights (e.g. for stock or equipment)
4. Document Everything
Keep clear records. Note down the conduct, investigation steps, advice received, and decisions made. This protects you if the decision is later disputed.
Final Thoughts
The 2024 Code changes give franchisors sharper tools to deal with serious breaches—but they come with compliance risks. Not every special circumstance allows for instant action. If you’re unsure, or if facts are still unfolding, get advice from a franchise lawyer early.
At Magnolia Legal, we help franchisors take decisive, defensible steps when things go wrong. If you’re thinking about terminating a franchise agreement under a special circumstance, talk to our team today.
By Emma Jervis
April 2025