Changes to the Franchising Code of Conduct
For our customers who are involved in franchising, either as a franchisor or franchisee, be aware that the Franchising Code of Conduct has been revised and updated.
Franshising Code of Conduct set to change 1st January 2015
Changes to the Code will come into effect from 1 January, 2015.
Franchise Agreements entered into, renewed, extended or transferred on or after 1 October 1998 will also be affected and the Code will extend obligations to this class of existing Agreement.
Some of the changes to the Code, include:-
- additional disclosure requirements regarding online sales;
- an information sheet covering the risks and benefits of franchising which franchisors are required to provide to franchisees;
- limits on the capital expenditure franchisors can require from franchisees;
- greater transparency obligations on the franchisor to account for the use of marketing funds, and requiring the franchisor to establish a separate fund for marketing and advertising fees;
- requiring the franchisor and franchisee to act in “good faith” in their dealings with each other;
- the introduction of penalties and infringement notices for failing to comply with the Code in a substantial way.
We will be working to update our franchising suite of documentation in readiness for the switch to the updated Code, and will keep you updated about impending changes.
For more information, see here.
Risks and Benefits Sheet
The Risks and Benefits Sheet outlines a range of issues with the aim of enabling the franshisee to make a more informed decision about their purchase. It asks them to consider issues such as:-
- What is franchising?
- Why consider franchising?
- Understanding the franchising relationship
- Unexpected expenses
- The risks of franchising
- Due diligence, including reading all the documentation.
- Getting advice
- Knowing your rights
By Ian MacLeod