Contents

1 　Name of Regulations [see Note 1] 　

2 　Commencement 　　

3 　Code of conduct 　　

Schedule 　Franchising Code of Conduct 　

Part 1　 Preliminary 　　

1 　Name of code [see Note 1] 　

2 　Purpose of code　　

3 　Definitions　　

4 　Meaning of franchise agreement 　　

5 　Application 　　

Part 2 　Disclosure 　　

6 　Franchisor must maintain a disclosure document 　

6A　 Purpose of disclosure document 　

6B 　Requirement to give disclosure document 　

6C　 Additional information 　

7　 　Layout 　　

8 　Application　　

10 　Franchisor obligations　 　　

11 　Advice before entering into franchise agreement　 　

Part 3　 　Conditions of franchise agreement 　

13 　Cooling off period 　

14 　Copy of lease　　 　

15 　Association of franchisees 　

16 　Prohibition on general release from liability　 　

17 　Marketing and other cooperative funds　 　

18 　Disclosure of materially relevant facts　 　

19　 Current disclosure document 　　

20 Transfer of the franchise 　

21 Termination — breach by franchisee 　

22 Termination — no breach by franchisee　

23 Termination — special circumstances 　

Part 4 　Resolving disputes　 　

24 　Definitions　　

25 　Mediation adviser　

26 　Internal complaint handling procedure 　

27 　Code complaint handling procedure 　　

28 　Choice of procedure 　

29 　Procedure　　

30 　Mediation under the code 　

30A 　Termination of mediation 　

31 　Conditions　 　　

Annexure 1

Disclosure document for franchisee or prospective franchisee 　

Annexure 2

Short form disclosure document for franchisee or prospective

franchisee 　　

1　 　Name of Regulations [see Note 1]

These Regulations are the Trade Practices (Industry Codes —

Franchising) Regulations 1998.

2　 　Commencement

These Regulations commence on 1 July 1998.

3　 　Code of conduct

For section 51AE of the Trade Practices Act 1974, the code set

out in the Schedule:

(a) is prescribed; and

(b) is a mandatory industry code.

Schedule　 　Franchising Code of Conduct

(regulation 3)

Part 1　 　Preliminary

1 　Name of code [see Note 1]

This code is the Franchising Code of Conduct.

2 　　Purpose of code

(1) 　The purpose of this code is to regulate the conduct of participants in franchising towards other participants in franchising.

(2) 　In relation to franchise agreements concerning the retail marketing of motor fuel, this code is intended to operate concurrently with the Petroleum Retail Marketing Franchise Act 1980.

3 　Definitions

(1) In this code:

ABN has the same meaning as it has in the A New Tax System(Australian Business Number) Act 1999.

associate, for a franchisor, means a person:

(a) who:

(i) is a director or related body corporate, or a director of a related body corporate, of the franchisor; or

(ii) for a franchisor that is a proprietary company —directly or indirectly owns, controls, or holds with power to vote, at least 15% of the issued voting shares in the franchisor; or

(iii) is a partner of the franchisor; and

(b) whose relationship with the franchisor is relevant to the franchise system, including supplying goods or services to a franchisee.

disclosure document has the meaning given by clause 6.

franchise includes the following:

(a) the rights and obligations under a franchise agreement;

(b) a master franchise;

(c) a subfranchise;

(d) an interest in a franchise.

franchise agreement has the meaning given by clause 4.

franchisee includes the following:

(a) a person to whom a franchise is granted;

(b) a person who otherwise participates in a franchise as a franchisee;

(c) a subfranchisor in its relationship with a franchisor;

(d) a subfranchisee in its relationship with a subfranchisor.

franchise system includes a business system in which a franchisor grants a franchise to a franchisee.

franchisor includes the following:

(a) a person who grants a franchise;

(b) a person who otherwise participates in a franchise as a franchisor;

(c) a subfranchisor in its relationship with a subfranchisee;

(d) a master franchisee in a master franchise system;

(e) a master franchisee in its relationship with a franchisee.

interest in a franchise includes a legal or beneficial interest in:

(a) a franchise agreement or a franchised business; or

(b) shares or voting rights in a corporation, not being a listed corporation that owns a franchised business; or

(c) units or voting rights in a unit or other trust that owns a franchised business; or

(d) the capital or income of a partnership that owns a franchised business.

master franchise means a franchise in which the franchisor grants to a subfranchisor or master franchisee the right:

(a) to grant a subfranchise; or

(b) to participate in a subfranchise.

master franchisee or subfranchisor means a person who is:

(a) a franchisee in relation to a master franchise; and

(b) a franchisor in relation to a subfranchise granted under the master franchise.

motor vehicle means a vehicle that uses, or is designed to use, volatile spirit, gas, oil, electricity or any other power (except human or animal power) as the principal means of propulsion, but does not include a ehicle used, or designed to be used, on a railway or tramway.

Examples of motor vehicles

? 1 motor car

? 2 motor cycle

? 3 motorcycle

? 4 tractor

? 5 motorised farm machinery

? 6 motorised construction machinery

? 7 aircraft

? 8 motor boat

motor vehicle dealership means a business of buying, selling, exchanging or leasing motor vehicles that is conducted by a person other than a person who is only involved as a credit provider, or provider of other financial services, in the purchase, sale, exchange or lease.

prospective franchisee means a person who deals with a franchisor for the right to be granted a franchise.

serious offence means an offence under any law of the Commonwealth or a State or a Territory for which, if the act or omission had taken place in the Jervis Bay Territory, a person would be liable, on first conviction, to imprisonment for a period of not less than 5 years.

Note Jervis Bay Territory is mentioned because it is a jurisdiction in which the Commonwealth has control over the criminal law.

subfranchisor has the same meaning as master franchisee.

supply see subsection 4 (1) of the Act.

Note 1 Under subsection 4 (1) of the Act, supply, when used as a verb,

includes:

(a) for goods — supply (including re-supply) by way of sale, exchange,

lease, hire or hire-purchase; and

(b) for services — provide, grant or confer; and, when used as a noun, has a corresponding meaning.

Note 2 the Act means the Trade Practices Act 1974 (see the Trade

Practices Regulations, r 2 (1)).

trade mark has the meaning given by the Trade Marks Act 1995.

Note A trade mark is a sign (including any letter, word, name, signature,

numeral, device, brand, heading, label, ticket, aspect of packaging, shape,

colour, sound or scent (or any combination of these)) used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person (see Trade Marks Act 1995, s 17).

transfer, for a franchise, includes an arrangement in which the

franchise is granted, transferred or sold.

(2) In this code, the following terms have the meanings given by

the Corporations Law:

accounting standard 　listed corporation

ACN　 misconduct

ARBN　 　officer

body corporate 　proprietary company

director 　registered company

executive officer　 auditor

externally-　 　registered office

administered body　 related body corporate corporate 　secretary

insolvent under　 small proprietary administration　 company.

4 　Meaning of franchise agreement

(1) A franchise agreement is an agreement:

(a) that takes the form, in whole or part, of any of the following:

(i) a written agreement;

(ii) an oral agreement;

(iii) an implied agreement; and

(b) in which a person (the franchisor) grants to another person (the franchisee) the right to carry on the business of offering, supplying or distributing goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the franchisor or an

associate of the franchisor; and

(c) under which the operation of the business will be substantially or materially associated with a trade mark, advertising or a commercial symbol:

(i) owned, used or licensed by the franchisor or an associate of the franchisor; or

(ii) specified by the franchisor or an associate or the franchisor; and

(d) under which, before starting business or continuing the business, the franchisee must pay or agree to pay to the franchisor or an associate of the franchisor an amount including, for example:

(i) an initial capital investment fee; or

(ii) a payment for goods or services; or

(iii) a fee based on a percentage of gross or net income whether or not called a royalty or franchise service fee; or

(iv) a training fee or training school fee; but excluding:

(v) payment for goods and services at or below their usual wholesale price; or

(vi) repayment by the franchisee of a loan from the franchisor; or

(vii) payment of the usual wholesale price for goods taken on consignment; or

(viii) payment of market value for purchase or lease of real property, fixtures, equipment or supplies needed to start business or to continue business under the franchise agreement.

(2) For subclause (1), each of the following is taken to be a franchise agreement:

(a) transfer, renewal or extension of a franchise agreement;

(b) a motor vehicle dealership agreement.

(3) However, any of the following does not in itself constitute a franchise agreement:

　(a) an employer and employee relationship;

(b) a partnership relationship;

(c) a landlord and tenant relationship;

(d) a mortgagor and mortgagee relationship;

(e) a lender and borrower relationship;

(f) the relationship between the members of a cooperative that is registered, incorporated or formed under any of the following laws:

(i) Co-operatives Act 1992 of New South Wales;

(ii) Co-operatives Act 1996 of Victoria;

(iii) Cooperatives Act 1997 of Queensland;

(iv) Co-operative and Provident Societies Act 1903 of Western Australia;

(v) Co-operatives Act 1997 of South Australia;

(vi) Co-operative Industrial Societies Act 1928 of Tasmania;

(vii) Co-operative Societies Act 1939 of the Australian Capital Territory;

(viii) Co-operatives Act 1997 of the Northern Territory;

(ix) the Corporations Law.

5 　Application

(1) This code applies to a franchise agreement entered into on or after 1 October 1998.

(2) For the parties to a franchise agreement entered into before 1 October 1998:

(a) clauses 14 (Copy of lease), 15 (Association of franchisees) and 17 (Marketing and other cooperative funds) apply to the parties on and after 1 July 1998; and

(b) the rest of this code applies to the parties on and after 1 October 1998.

(3) However, this code does not apply to a franchise agreement:

(a) if the franchisor:

(i) is resident, domiciled or incorporated outside Australia; and

　(ii) grants only 1 franchise or master franchise to be operated in Australia; or

(b) to which another mandatory industry code, prescribed under section 51AE of the Act, applies; or

(c) if:

(i) the franchise agreement is for goods or services that are substantially the same as those supplied by the franchisee before entering into the franchise

agreement; and

(ii) the franchisee has supplied those goods or services for at least 2 years immediately before entering into the franchise agreement; and

(iii) sales under the franchise are likely to provide no more than 20% of the franchisee’s gross turnover for goods or services of that kind for the first year of the franchise.

(4) Paragraph (3) (c) ceases to apply to a franchise agreement if:

(a) sales under the franchise provide more than 20% of the franchisee’s gross turnover for the goods or services for 3 consecutive years; and

(b) the franchisee tells the franchisor that paragraph (a) applies.

Part 2　 　Disclosure

Division 2.1 Disclosure document

6 　Franchisor must maintain a disclosure document

(1) A franchisor must, before entering into a franchise agreement, and within 3 months after the end of each financial year after entering into a franchise agreement, create a document (a disclosure document) for the franchise in accordance with this Division.

　　 (2) A disclosure document:

(a) must be:

(i) if the franchised business has an expected annual turnover of $50 000 or more — in accordance withAnnexure 1; or

(ii) if the franchised business has an expected annual turnover of less than $50 000 — in accordance with Annexure 1 or 2; and

(b) may include additional information under the heading ‘Other relevant disclosure information’; and

(c) must be signed by a director or an executive officer of the franchisor.

6A　 　Purpose of disclosure document

The purposes of a disclosure document are:

(a) to give to a prospective franchisee, or a franchisee proposing to enter into, renew or extend a franchise agreement, information from the franchisor to help the franchisee to make a reasonably informed decision about the franchise; and

(b) to give a franchisee current information from the franchisor that is material to the running of the franchised business.

6B 　Requirement to give disclosure document

(1) A franchisor must give a current disclosure document to:

(a) a prospective franchisee; or

(b) a franchisee proposing to renew or extend a franchise agreement.

(2) If a subfranchisor proposes to grant a subfranchise to a prospective subfranchisee:

(a) the franchisor and subfranchisor must:

(i) give separate disclosure documents, in relation to the master franchise and the subfranchise respectively, to the prospective subfranchisee; or

　(ii) give to the prospective subfranchisee a joint disclosure document that addresses the respective obligations of the franchisor and the subfranchisor;

and

(b) the subfranchisor must comply with the requirements imposed on a franchisor by this Part.

Note A subfranchisor is also sometimes referred to as a master franchisee:

see subclause 3 (1).

6C 　Additional information

If a franchisee or prospective franchisee who is given a disclosure document in accordance with Annexure 2 asks the franchisor for the information referred to in sections 3, 5, 6, 9,10, 11, 14, 17, 18, 19, 21 and 22 of Annexure 1, the franchisor must give that information, unless, in the circumstances, it is reasonable to withhold the information.

7　 　Layout

(1) Information in a disclosure document must be set out:

(a) in the form and the order, and under the numbering, set out in Annexure 1 or 2 as the case requires (the relevant Annexure); and

(b) under the titles used in the relevant Annexure.

(2) A disclosure document must have a table of contents based on the items in the relevant Annexure, indicating the page number on which each item begins.

Division 2.2 Before franchise agreement

8　 　Application

This Division applies to a disclosure document in accordance with Annexure 1 or 2 for:

(a) a prospective franchisee; or

(b) a franchisee proposing to enter into, renew or extend a franchise agreement.

10　 　Franchisor obligations

A franchisor must give a copy of this code and a disclosure document:

(a) to a prospective franchisee at least 14 days before the prospective franchisee:

(i) enters into a franchise agreement or an agreement to enter into a franchise agreement; or

(ii) makes a non-refundable payment (whether of money or of other valuable consideration) to the franchisor or an associate of the franchisor in connection with the proposed franchise agreement; or

(b) to a franchisee at least 14 days before renewal or extension of the franchise agreement.

Note Subsection 9 (1) of the Electronic Transactions Act 1999 provides

that a requirement under a law of the Commonwealth to give information in

writing is satisfied by giving the information electronically if it is reasonable to expect that the information will be readily accessible so as to be useable for subsequent reference, and the person to whom the information is given consents to it being provided electronically.