The Australian Franchising Code of Conduct, Explained

Last Updated on 31/07/2026 by Damin Murdock

The Franchising Code of Conduct, under the Competition and Consumer (Industry Code 0 Franchising) Regulations 2024 (Cth), was rolled out on 1 April 2025, with full mandatory compliance from 1 November 2025. The new code strengthened obligations for franchisors and broadened protections for franchisees. If you operate or are looking to invest in a franchise network, understanding the legal framework is essential to avoid substantial civil penalty risks. 

When Does The Code Apply?

It applies directly to new agreements executed, renewed or assigned on or after 1 April 2025. It also applies to all pre-contractual negotiations, disclosures, and ongoing operational conduct tied to those agreements. 

For existing franchise agreements entered into before, the older 2014 Code continues to apply until that agreement is renewed, extended or transferred. 

Changes to the Franchising Code

The Franchising Code’s  key compliance mandates include the following:

• Reasonable Opportunity for Return on Investment (ROI)

Franchisors are legally prohibited from entering into a franchise agreement unless the commercial terms provide the franchisee with a reasonable opportunity to achieve a return on their initial and ongoing investment during the term of the agreement. This doesn’t guarantee profitability, but it guarantees that the structure, fees and territory margins make commercial recovery viable. 

• Mandatory Early Termination Compensation

If a franchisor terminates an agreement early because of network rationalisation, corporate reorganisation, or market withdrawal from Australia, they must compensate the franchisee. Agreements must now explicitly outline the formula used to calculate compensation, factoring in lost profits (direct and indirect), unamortised capital expenditure requested by the franchisor, loss of opportunity, winding-up costs and compulsory stock/equipment buy-backs. 

• Restraints of Trade Restrictions

The Code heavily restricts post-termination restraints of trade. A franchisor cannot include or enforce a restraint of trade clause if a franchisee has requested an extension or renewal on substantially similar terms, has met all conditions, is not in serious breach, and has not received adequate goodwill compensation upon expiration.

• Overhauled “Specific Purpose Funds” 

Marketing and cooperative funds were expanded into Specific Purpose Funds. The Specific Purpose Funds cover any franchisee contributions used within the shared system expenses (like IT infrastructure, national advertising, conferences, etc). Franchisors have to maintain separate bank accounts and have transparent annual financial statements within four months of the financial year-end, and undergo mandatory audits.   

• Enhanced Disclosure Documents

There is no longer a requirement for a separate Key Facts Sheet to reduce duplication. Instead, important details are incorporated directly into a more comprehensive Disclosure Document, explicitly disclosing: 

• Anticipated capital expenditures and recoupment expectations
• If there is localised competition from businesses unassociated with the franchisor. 
• Regulatory proceedings or Fair Work Act breaches relevant to the franchise network.    

Managing Dual Regulatory Regimes

Because older franchise agreements remain under the 2014 Code until they renew, are extended or transferred, franchisors have to manage two separate compliance standards. This is why many franchisors choose to maintain a single, updated Disclosure Document and a master franchise agreement template that complies fully with the new Code. This mitigates the risk of mistakenly issuing non-compliant documentation to new or renewing franchisees.

Enforcements and Civil Penalties

The Australian Competition and Consumer Commission is responsible for active enforcement.  Non-compliance may result in severe civil penalties (up to 600 penalty units per breach). The Australian Small Business and Family Enterprise Ombudsman also has the authority to publicly name franchisors who refuse to participate in good faith alternative dispute resolution.

Today, the transition window is no longer there, so operating under outdated agreements or disclosure practices poses immediate legal and financial risk to the parties. 

At Leo Lawyers, we are experienced in reviewing, drafting and updating franchise networks to ensure their strict compliance with Australian law. If you need legal support, feel free to contact Damin Murdock at Leo Lawyers via our website, on (02) 8201 0051 or at office@leolawyers.com.au. Further, if you liked this article, please subscribe to our newsletter via our Website, and subscribe to our YouTube , LinkedIn, Facebook and Instagram. If you liked this article or video, please also give us a favourable Google Review.

DISCLAIMER: This is not legal advice and is general information only. You should not rely upon the information contained in this article, and if you require specific legal advice, please contact us.