On Friday 4th June, the Hon Dr Craig Emerson MP announced changes to the Franchising Code of Conduct ("Code") which will come into effect on 1 July 2010.

While the amendments do not appear major in nature, they will nevertheless affect the disclosure requirements with respect to a number of aspects of the franchise offer as well as prescribe certain conduct throughout the term, such as dispute resolution, and end-of-term, such as renewal notification.

Current form disclosure documents cannot be used for agreements entered after 1 July 2010.

Noteworthy aspects of the changes are summarised below. If you have any questions, please do not hesitate to contact one of our franchise lawyers in Sydney or Melbourne on 1300 798 501.

1. First Page

The first page statement of the disclosure document must now include an express statement that franchising, as any other business, could fail during the franchise term.

2. Unilateral variation of franchise agreements by franchisors

Franchisors must now disclose the circumstances in which unilateral variations to franchise agreements may take place and the circumstances in which the franchisor has unilaterally varied a franchise agreement in the past three financial years (after 1 July 2013) or since 1 July 2010 (from 1 July 2011 - 1 July 2013).

3. Unforeseen significant capital expenditure

Franchisors must now disclose whether the franchisee will be required to undertake significant capital expenditure that was not disclosed by the franchisor before the franchise agreement was entered into, regardless whether such requirement is contained in the franchise agreement, the operations manual or by any other means.

4. Dispute resolution

The Code now includes a list of essential conduct to encourage parties to approach a dispute resolution process in a conciliatory manner, which includes attending and participating in meetings at reasonable times. Franchisors will now have to disclose whether the franchisor?s costs incurred in dispute resolution will be attributed to the franchisee.

5. End of term arrangements

Franchisors will now be required to inform franchisees six months before the end of the franchise agreement whether or not they intend to renew or enter into a new agreement. Franchisors will need to diarise this date for each franchisee to ensure compliance.

The franchisor must also disclose whether, during the last three financial years, it considered any significant capital expenditure undertaken by franchisees, in determining the arrangements to apply at the end of their agreements.

6. Confidentiality obligations

There is now a requirement to disclose whether any confidentiality obligation will be imposed on the franchisee, and, if so, the details of the matters the obligation may cover (e.g. outcomes of mediation, trade secrets, individual fee arrangements).

7. Good faith

The Code will now include a statement that nothing in it limits any obligation imposed by the common law on the parties to a franchise agreement to act in good faith.

8. Marketing fund audit waiver

The amended Code is clearer about the ability of Franchisors to avoid auditing the marketing fund where 75% or more of franchisees agree for the audit to be waived. Such agreement will be valid for three years.

Other minor amendments are designed to improve the drafting of the Code.