Introduction
From 1 April 2025, a newly reformed Franchising Code of Conduct under the Competition and Consumer (Industry Codes—Franchising) Regulations 2024 will apply to franchise systems across Australia. The changes, shaped by the Schaper Review, aim to increase fairness, transparency, and legal accountability in a sector worth over A$174 billion, employing more than 565,000 Australians according to the Franchise Council of Australia.
This guide explains the critical changes, deadlines, and what franchisors must do to remain compliant and competitive.
What Prompted These Changes?
In early 2024, the Australian Treasury published the findings of the Independent Review of the Franchising Code of Conduct, led by Dr Michael Schaper. The review identified problems with:
- Restraint of trade clauses preventing fair competition
- Unclear disclosure obligations
- Lack of return-on-investment (ROI) protections for franchisees
- Weak oversight of franchise marketing funds
The government accepted most of the recommendations and committed to phasing in reforms from April to November 2025.
Key Reforms Effective 1 April 2025
1. Ban on Restraint-of-Trade Clauses
Franchisors can no longer enforce restraint of trade clauses when a franchisee seeks to renew or extend an agreement, unless the franchisee is in serious breach. This enhances franchisee mobility post-contract (Hall & Wilcox).
2. Expanded Civil Penalties for Non-Compliance
Previously, only some breaches attracted civil penalties. Under the new Code:
- Breaches now carry up to 600 penalty units (~A$198,000)
- Corporations may face up to A$10 million, or 3× the benefit gained, or 10% of turnover
See details on civil penalties at the ACCC.
3. 7-Day Termination for Serious Misconduct
Franchisors may now terminate a franchise within 7 days if the franchisee commits serious misconduct, such as fraud, licensing breaches, or OH&S violations. No dispute resolution is required (Australian Small Business and Family Enterprise Ombudsman).
4. Opt-Out of Disclosure and Cooling-Off Period
If a franchise agreement is being renewed with materially similar terms, the franchisee can opt out—via written notice—from receiving a new Disclosure Document and the 14-day cooling-off period (Sparke Helmore Lawyers).
5. Streamlined Disclosure Register Updates
The Key Facts Sheet is abolished. Now, franchisors must:
- Integrate that information into a single Disclosure Document
- Populate new fields on the Franchise Disclosure Register
- Remove or not upload full Disclosure Documents (these will no longer be visible publicly)
See Treasury’s technical guidance for specifics.
Additional Reforms Effective 1 November 2025
These changes come with a transition period to give franchisors time to adapt:
1. Disclosure of Significant Capital Expenditure
If franchisees are expected to make major investments (e.g. fit-outs, equipment), franchisors must clearly explain:
- Why the expense is required
- The expected ROI
- Financial timing, risks, and alternatives
Learn more via Redemont Legal.
2. Mandatory ROI Opportunity and Compensation Provisions
- Agreements must guarantee franchisees a reasonable opportunity to earn returns on investments (Section 44)
- If a franchisor withdraws from the market or restructures, the franchisee must be compensated or offered a buy-back for unused stock or equipment (Section 43)
3. Auditing Requirements for Specific Purpose Funds
Marketing, IT, or cooperative funds (now called “specific purpose funds”) must:
- Be held in separate bank accounts
- Provide annual financial statements within 4 months of financial year-end
- Undergo audits or independent reviews
- Be fully disclosed to contributing franchisees (ACCC guide)
Compliance Checklist for Franchisors
| Deadline | What to Do |
| By 1 April 2025 | Remove prohibited restraint clauses; update termination clauses; enable opt-outs for renewals; consolidate Disclosure Documents; update Franchise Register |
| By 1 Nov 2025 | Add ROI and compensation clauses; disclose capital expenditure; establish separate fund accounts; audit and report on fund usage |
| Ongoing | Train internal teams; update register annually; maintain robust documentation and compliance logs |
Why This Matters: Strategic Value of Compliance
- Reduce risk of heavy fines from ACCC enforcement
- Boost franchisee trust with fairer contract terms and ROI transparency
- Strengthen governance with separate funds, audit trails, and documentation
- Improve reputation with government and franchisee bodies like the Franchise Council of Australia
Australia’s Franchising Sector in 2025
According to the Franchise Council of Australia and IBISWorld:
- Over 1,200 franchise networks and 94,000 units
- Contributes A$174–$200 billion annually to GDP
- Employs more than 565,000 Australians
- Majority of systems are homegrown and SME-run, amplifying the importance of compliance at all levels
Next Steps: How to Prepare
- Audit all agreements and Disclosure Documents now
- Re-train staff on new obligations and penalty risks
- Engage franchise-savvy legal counsel to review changes and redraft contracts
- Check your Franchise Disclosure Register and populate all new fields
- Inform franchisees of their rights under the new Code
- Plan for 1 November updates—especially around capital expenditure, compensation clauses, and fund transparency
Conclusion
The Franchising Code of Conduct Australia 2025 is the most significant legal update in a decade. Its phased rollout gives franchisors time to adapt—but only if they start early. Those who proactively update their systems, invest in governance, and lead with transparency will not only avoid penalties but build stronger, more resilient franchise networks.
If you’d like tailored support navigating these reforms, explore Growth Hive’s franchise opportunities listing or join our Facebook community to connect with others navigating these same changes.
