Franchising Code of Conduct Changes 2025: What You Need to Know

Franchising Code of Conduct Changes 2025: What You Need to Know

Major Legal Overhaul for Franchising in 2025

Franchisors and franchisees across Australia are facing a sweeping regulatory shift from 1 April 2025, with the introduction of the remade Franchising Code of Conduct under the Competition and Consumer (Industry Codes—Franchising) Regulations 2024. These reforms deliver a clear message from government: higher standards, stronger protections for franchisees, and greater accountability for franchisors.

The overhaul follows sustained scrutiny of the sector and increased regulatory focus. In the 2025 Federal Budget, the Australian Competition and Consumer Commission (ACCC) was allocated $7.1 million to bolster enforcement of franchising laws. This reflects a broader push toward active compliance monitoring and deterrence.

Whether you’re a prospective franchisor planning to launch a new system, or an existing franchisor reviewing your agreements, here’s what you need to know:

What’s Changing—and When?

Key Reforms from 1 April 2025:

• Key Facts Sheet Abolished: Franchisors are no longer required to create, maintain, or provide a Key Facts Sheet to prospective franchisees. Previously uploaded sheets are no longer publicly viewable on the Franchise Disclosure Register.
• Disclosure Register Changes: Franchisors may no longer upload full disclosure documents to the Register (those already on the Register were also made non-viewable from 1 April 2025). Instead, they must disclose key background information—such as convictions, insolvency events, or whether arbitration is permitted in franchise agreements.
• Restraint of Trade Restricted: The new Franchising Code of Conduct prohibits the inclusion of post-term non-compete clauses where a franchisee, not being in default of the franchise agreement, has sought a renewal or extension and the franchisor does not extend or renew the franchise.
• Ombudsman Powers Expanded: The Australian Small Business and Family Enterprise Ombudsman gained authority under the Franchising Code of Conduct to publicly name franchisors who refuse to engage in, or who withdraw from, an agreed alternative dispute resolution process.
• Increased Penalties and Enforcement: All substantive obligations under the new Code are now classified as civil penalty provisions (with a few specific exceptions for new car dealerships). The maximum penalty for most breaches of the Franchising Code of Conduct has been set to 600 penalty units per violation (currently, per breach this would equate to $198,000 for individuals and $990,000 for companies).

Those penalties are also in addition to the higher penalties in place for serious breaches (including a failure to provide financial documents as part of the franchisor’s disclosure requirements, the failure to disclose material facts to a franchisee and conduct attempting to restrict franchises from associating with other franchisees), with the effect that:

• • For corporations, the maximum penalty is the greater of:
    • $10 million, or
    • Three times the value of the benefit obtained from the breach, or
    • 10% of the annual turnover in the preceding 12 months, if the benefit cannot be determined.
  • For individuals, the penalty can be up to $500,000 per breach.
• Unified Treatment of Marketing & Other Funds: The Franchising Code of Conduct introduces a new defined term “specific purpose fund” which includes marketing, cooperative, and other pooled contributions from franchisees. These funds must comply with the disclosure and reporting requirements specified in the Franchising Code of Conduct, noting these requirements mirror the previous requirements for marketing funds.
• Other April 2025 Updates: A few additional changes from 1 April include a refined definition of “motor vehicle dealership” to clarify that any servicing/repairs done by the dealer are within the scope of the Franchising Code of Conduct, and confirmation that the Franchising Code of Conduct’s good faith obligation and all other rights continue to apply.

Reforms effective from 1 November 2025:

• Disclosure Document must include:
  • Significant capital expenditure: If franchisees are expected to undertake major capital spending, the Disclosure Document must now detail the rationale, timing, benefits and risks.
  • Specific purpose fund information: Where franchisees contribute to a fund, disclosure must include its structure, purpose, and administrative cost breakdown.
• Franchise agreements must include:
  • Right on Investment (ROI): Agreements must now provide franchisees a reasonable opportunity to recover their investment during the term. Whilst franchise agreements do not need to be updated to reflect this, we recommend that an acknowledgement by the parties is inserted to the effect that they have negotiated the agreement with a view to providing the franchisee a reasonable opportunity to recover their investment during the term. The Franchisor should also ensure they retain evidence documenting the reasonable basis particularly in relation to determining the length of the term of the Franchise.
  • Early Termination Compensation: Franchisees are entitled to compensation if the franchisor terminates the agreement early in certain circumstances, such as the Franchisor exiting the Australian market, changing its distribution model in Australia or restructuring its franchise network for outstanding stock purchased as required by the franchise agreement or or any essential speciality equipment and branded product or merchandise required to operate the franchise and which cannot be repurposed for a similar business.

These staggered changes to the Franchising Code of Conduct were designed to give franchisors time to adjust agreements, systems, and disclosure materials before full compliance is required.

Before vs After: What the New Code Means for You

Why It Matters

Franchise disputes, misleading disclosures, and sudden non-renewals have historically created significant tension in the sector. The 2025 Franchising Code of Conduct  reforms seek to promote greater transparency and fairness—particularly in relation to investment recovery, dispute handling, and fund accountability.

From a compliance perspective, the broader scope of civil penalties and the Ombudsman’s expanded powers mean franchisors must proactively review all documents and processes. Relying on outdated templates or ignoring disclosure gaps could now result in substantial financial penalties.

For franchisees, these changes provide improved transparency and greater certainty around their commercial position—particularly when making large investments or dealing with system-wide restructures.

What Franchisors and Franchisees Should Do Now

For Franchisors:

• Review all franchise agreements —ensure specific purpose funds, ROI and termination clauses are inserted or updated to reflect the new code.
• Update Disclosure Documents to include capital expenditure details and specific funds.
• Refresh register profiles to meet new ACCC profile requirements.
• Audit any pooled funds to ensure they meet the definition of “specific purpose fund.”

For Franchisees:

• Scrutinise disclosure documents —seek clarification where capital spending or fees are unclear.
• Understand your legal rights—especially around termination, renewal, and restraints.
• Check register listings for indicators of litigation, insolvency, or prior breaches.
• Act early in disputes—seek legal guidance without delay .

Need Help Navigating the New Code?

The 2025 Franchising Code of Conduct introduces the most extensive regulatory changes the Australian franchising sector has seen in over a decade. Businesses should act now to ensure their systems and agreements reflect the new legal standards.

Rostron Carlyle Rojas Lawyers has extensive experience advising both franchisors and franchisees. We can assist with Code compliance, agreement drafting, disclosure obligations, dispute resolution, and enforcement matters.

Speak with our team today to ensure your business is prepared and compliant for the 2025 Code and beyond.