The ACCC is currently undertaking a formal review of Australia’s unfair contract terms (UCT) regime, following the significant amendments that came into force on 9 November 2023.
While many franchisors have already turned their minds to UCT compliance over the past 18 months, this review is a clear signal: UCT reform is not done — and franchising is firmly in the firing line.
At a high level, UCT laws apply to standard form contracts and contracts with consumers or small businesses. Franchise agreements will almost always fall within the first limb, and now — increasingly — the second.
A term will be “unfair” if it creates a significant imbalance in the parties’ rights and obligations, is not reasonably necessary to protect legitimate interests, and would cause detriment if relied upon.
We explored this in more detail in our earlier article on UCTs in franchising (see our article ‘Are Franchisors Sitting Ducks When It Comes to UCTs?’: here) but the key point remains the same: this is no longer a theoretical issue.
What actually changed in 2023?
The 2023 amendments were not incremental — they were structural. Most significantly, breaches of the UCT regime now attract civil penalties. Previously, an unfair term was simply void. Now, it can expose a franchisor to very significant financial consequences.
For corporate entities, penalties can be up to $50 million, or 30% of turnover during the breach period.
From a franchise lawyer’s perspective, this is the real shift. UCT is no longer a drafting issue — it is a regulatory risk that sits alongside misleading and deceptive conduct and unconscionable conduct.
The scope of the regime has also expanded considerably. The definition of “small business” now captures entities with fewer than 100 employees or less than $10 million in turnover.
In practice, that means most franchisees are now within scope. Combined with the removal of the old contract value thresholds, this brings a large proportion of franchise networks squarely within the regime. We unpacked this shift in our earlier piece: “Why Most Franchise Agreements Now Fall Within UCT Laws”.
The concept of a “standard form contract” has also been clarified and broadened. A contract may still be standard form even where there is some opportunity to negotiate, or where a party can choose between pre-determined options.
For franchisors, the position is clear: your franchise agreement will almost certainly be treated as a standard form contract.
So why the review?
The legislation required a review after two years of operation, with a report expected around May 2026.
However, this is not simply procedural. The ACCC is actively assessing whether the reforms are working, how they are being applied in practice, and whether further changes are required — particularly in sectors like franchising.
Importantly, there is a live proposal to extend UCT protections to all franchise agreements regulated under the Franchising Code. This follows the 2023 Code Review, which identified UCT reform as a key mechanism for improving fairness in franchise relationships.
If implemented, this would remove any residual uncertainty and effectively hardwire UCT compliance into every franchise agreement in Australia.
What we’re seeing in practice
From what we are seeing in practice, the biggest risk for franchisors lies in legacy documents. Many businesses updated disclosure documents and internal processes following the 2023 reforms, but did not fundamentally revisit their franchise agreements.
That is a problem. UCT is not about disclosure — it is about substantive rights and how risk is allocated between the parties.
We also continue to see an over-reliance on the idea of “market standard” drafting. From a franchise lawyer’s perspective, that is increasingly a dangerous position. The test is not whether a clause appears in other franchise agreements. The test is whether it is reasonably necessary to protect a legitimate interest, and whether it goes further than required.
Although there have been limited court decisions to date — largely due to transitional arrangements — regulator engagement is increasing. Complaints and reporting have risen, even if only modestly in some areas.
The absence of case law should not be taken as comfort. It simply reflects timing. Enforcement risk is building.
What franchisors should be doing now
First, undertake a proper audit of your franchise agreement. This should focus on the clauses that typically attract UCT scrutiny — unilateral variation rights, termination provisions, restraints, indemnities and limitations of liability. The key question is whether each of those provisions can be justified as reasonably necessary.
Secondly, ensure alignment between your agreement and your operational documents. Inconsistencies between the franchise agreement and the operations manual can increase UCT risk and undermine enforceability.
Thirdly, avoid overreach. The strongest franchise agreements we are seeing now are not the most aggressive — they are the most defensible. They still protect the franchisor, but they do so in a way that is targeted, proportionate and capable of justification if challenged.
Final thoughts
The direction of travel is clear. UCT laws are expanding, scrutiny is increasing, and franchising remains a focus area for reform.
If your franchise agreement has not been meaningfully revisited since the 2023 changes, there is a real risk that it is no longer fit for purpose. From a franchise lawyer’s perspective, this is one of the key areas where proactive work now can avoid significant issues later.
If you would like us to review your current franchise agreement or talk through how the UCT regime applies to your network, feel free to get in touch.