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Federal Minister for Small Business Bruce Billson (L)

A new Franchising Code of Conduct is due to come into effect on 1 January 2015.

A biennial snapshot of the franchising sector, released in October, shows that the most common cause of conflict in the sector is franchisee non-compliance, notably representing branding incorrectly and using unauthorised products.

Lorelle Frazer, director of the Asia-Pacific Centre for Franchising Excellence at Griffith University, authored the biennial report and has been surveying the sector every two years since 1998.

The latest figures show that the second most common disputes arise from communication or lack of it, and money, particularly fees, in an industry with a $65 billion annual turnover.

The franchise sector in Australia employs 460,000 people across 79,000 franchise businesses and has been regulated since 1998 by a mandatory code of conduct.

Federal Minister for Small Business Bruce Billson was expected to announce reforms to the Franchising Code of Conduct in November, ahead of its New Year’s Day commencement date.

Director of the Franchise Advisory Centre, Jason Gehrke, told ABC Radio National’s Law Report that the changes are the most significant to be made to the code since it was introduced 16 years ago.

‘They include an obligation of good faith on both parties to a franchise agreement, so that’s one major and fundamental change. Probably even more major and fundamental though are the changes that relate to the introduction of fines and penalties for breaches of the code as well,’ he said.

Mr Billson released in April this year the government’s proposed legislation amending the national Franchising Code and relevant provisions in the Competition and Consumer Act 2010.

Chief among them is allowing the Australian Competition and Consumer Commission (ACCC) to seek penalties of up to $51,000 from the court, and issue infringement notices of up to $8,500 without having to seek a court order.

‘This will be fairly significant in modifying the behaviour of those franchise sector participants who would like to think that the code doesn’t apply to them or that they somehow or another cannot be caught up by its provisions,’ Mr Gehrke told the Law Report.

The ACCC has intervened, through the courts, in misleading or deceptive conduct on the part of franchisors in recent times to seek damages for franchisees who have been disadvantaged financially.

The reforms follow recommendations from a review of the Franchising Code conducted in 2013, known as the Wein Review.

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