In brief

  • A Western Australia Parliamentary Committee1 has recommended against the adoption of the Franchising Bill 2010 (WA) (Bill), in favour of regulating franchising in all states and territories under the single federal Franchising Code of Conduct.
  • The Bill proposes changes including a statutory duty on the franchisor to act in good faith and power for the court to renew a franchise agreement where a franchisor has not acted in good faith in deciding not to renew a franchise agreement.
  • The Committee’s recommendation appears to make it less likely the Bill will be passed. If passed the Bill would apply in addition to the federal Franchising Code of Conduct.

Key changes proposed in the Bill

The Bill is intended to introduce state-based changes which would act in addition to the federal Franchising Code of Conduct. These changes include:

  • an express duty on the franchisor to act in good faith in connection with a franchise agreement
  • the availability of injunctions and civil penalties of up to $100,000 per breach of the provisions in the Bill, including for failure to act in good faith, and
  • court power to impose orders to renew an agreement if it is ‘just’ to do so, including if the franchisor has not acted in good faith when deciding not to renew an agreement.  

Implications of the Bill for businesses

  • Increased cost and complexity of compliance as a result of having to coordinate and manage both state and federal franchising regulations.
  • There is some uncertainty around when a franchisor will be taken to be conducting ‘a business in, or partially in, WA’, as required before the Bill applies to a particular franchise.  

Latest update on status of Bill

The Committee recommended against the adoption of the proposed state based franchising regime set out in the Bill. The Committee argued that amendments to the existing Franchising Code of Conduct would be a more appropriate and consistent method of dealing with franchising regulation in Australia. The Federal Government has indicated that it intends to review the Franchising Code of Conduct in 2013. The South Australian Government is also considering introducing a franchising bill on similar terms to the Bill.