Australian franchisee rights and risks in plain English

With new reforms about to be made to the Franchising Code of Conduct will come the obligation for franchisors to provide prospective franchisees with a short, simple and plain English document that sets out their rights and responsibilities, according to Small Business Minister Craig Emerson.

The details of the franchise will have to be made clear by franchisors, including any unilateral contract variations, unforeseen capital expenditure, requirements to meet legal costs and confidentiality restrictions with the franchise business.

“The reforms will put franchisees in a better position to understand the risks of going into franchising by giving them clearer information up front about the terms and conditions on offer,” commented the minister.

The guide in plain English will also include the process for the sale of the business, laid out in a clear manner, and will be additional to the current requirements under the Franchising Code.

The Franchise Council of Australia sees the reforms with good eyes: “The measures confirmed today are about improving what the government has already acknowledged (about franchising), that it is a global standard-setter in terms of both business performance and regulation. The measures are about further enhancing franchisee confidence without the need for onerous compliance obligations or confusing rule changes, which would do nothing but undermine investment in the sector and, ultimately, hurt both franchisor and franchisee,” commented executive director Steve Wright.

These reforms are set to come into effect in mid-2010.