Government Responds To Franchising Code Of Conduct Review

The Australian Government has released its response to the Independent Review of the Franchising Code of Conduct, saying it has agreed or agreed in principle to all of Dr Michael Schaper’s 23 recommendations.

According to the government, the changes will improve protections and streamline processes for franchisees and franchisors who act appropriately, while increased penalties will make it tougher for those who don’t. This will provide certainty for, and confidence in, the franchising sector in the immediate term.

The government will also provide guidance and educational materials to support and promote better franchise relationships. Additionally, it will look to the future of the franchising sector’s regulatory framework, and has agreed to look at the feasibility of introducing a licensing regime, working with the franchise sector to determine its design.

Small businesses including franchisees will also benefit from the expansion of the Australian Small Business and Family Enterprise Ombudsman’s dispute resolution service. This will provide more support to small businesses that are navigating disputes, including improved access to low‑cost legal advice.

Later this year, people will have an opportunity to comment on an exposure draft of the new code that is expected to operate from 1 April 2025.

Julie Collins, Minister for Small Business, said the government is committed to supporting franchisors and franchisees to grow and strengthen their businesses.

“I have heard the challenges in the franchising sector, particularly in relation to imbalances of power between franchisors and franchisees, which is why our response is targeted at improving partnerships in the sector,” said Collins. “We want a fair playing field for the sector, which is better for everyone, and this is what our response delivers.”

The MTAA welcomed the government’s response, saying it recognises that a fairer balance between franchisees and franchisors needs to be struck. The inclusion of other classes of automotive retailers beyond car dealers, such as motorcycle, truck, farm, and industrial machinery dealers, is also welcome given these businesses were previously not covered in the same way under the franchising code.

The association also reacted favourably to government clarification that service and repair work performed by motor vehicle dealerships is within the scope of the code. However, it said more work must be done to ensure the code is fit for purpose as sales channels evolve and new business models emerge with the introduction of EVs.

According to the MTAA, vehicle manufacturers and distributors are entering the EV retail business, financially impacting dealers and creating a power imbalance between the parties. The association has recommended a standalone code of conduct for the automotive retail sector and that the proposed licensing regime should examine and implement best practices to find a “just transition” for automotive dealers.

“MTAA has been calling on the government to address franchisor opportunism in the automotive retail sector for many years and we are pleased their endorsement of Dr Schaper’s recommendations will go some way to address the imbalance between automotive manufacturers and dealers,” said Matt Hobbs, CEO of the MTAA.

“We continue to believe that an independent code is a necessary step, particularly to drive greater competitiveness, sustainability, and productivity in the sector as it undergoes the biggest transformation in its history with the advent of EVs.”