Now, more than ever, franchisors need to take a look at their contracts and practices and make sure that they align with the new regime of fairness, as Partner Andrea Pane explains.
At the start of the year, the new Franchising Code of Conduct introduced an obligation on franchisors to act in good faith. And now the Government intends to extend the unfair contract protections in the Australian Consumer Law to franchisees.
So what does this mean for franchisors?
Franchisors need to be willing to negotiate with franchisees in the contract process.
But before that, franchisors need to review their contracts. The review should cover not just their franchise agreement but also any other contracts their franchisees may need to sign.
Franchisors need to know what is in their contracts and why, and make sure that those contracts are easy to read and as balanced as possible. This means not just looking at what is in the contracts at the moment but also looking at what might need to be included in those contracts to make them more balanced.
Otherwise franchisors run the risk of being unable to enforce critical rights under those contracts.