By Michael Fetter

25 January 2019

The ACCC has obtained a penalty of $2,604,000 against a franchisor of a franchise system for breaches of the Franchising Code of Conduct (the Code) and Australian Consumer Law (ACL).

The action taken by the ACCC against the franchisor related to acting in breach of good faith and making false or misleading representations when dealing with potential franchisees.

The ACCC’s action against this well-known franchisor has sent a strong warning to all franchisors to meet all required disclosure obligations when recruiting potential franchisees in accordance with the Code (this is a mandatory industry code) and ACL. The ACCC has confirmed that they will be continuing to take enforcement action against any franchisors that breach the Code and the ACL.

Franchisor obligations when dealing with prospective franchisees, include:

Ensuring that no statements made are false or misleading in relation to:

  • pricing of the franchise;
  • how long the franchise has been operating for; and
  • matters relating to the lease of business premises,


In addition, it is important for Franchisors to ensure that marketing funds are administered properly and in accordance with the code. In the above case, the franchisor failed to prepare the required marketing fund statements within required timeframes. Franchisors also need to be clear about what payments are refundable if the franchisee does not want to proceed with a franchise.

For potential franchisees, it is important you understand your rights in addition to undertaking your due diligence, such as obtaining disclosure documents, the proposed franchise agreement and ensuring that you are provided with a copy of the Code. What is critical, is that franchisee’s obtain legal advice concerning these documents and go into a franchise with their eyes wide open.


For further advice relating to your obligations as a Franchisor under the Code and the ACL or advice relating to your rights as a Franchisee under the Code and the ACL, please contact Michael Fetter or a member of our commercial law team.


The material contained in this publication is meant to be informational only and is not to be construed as legal advice. Tisher Liner FC Law will not be held liable or responsible for any claim, which is made as a result of any person relying upon the information contained in this publication.

Related Articles

View All
Commercial Contracts & Agreements / Business Law

When contracts end: The perils of miscommunication and misunderstanding

From a practical perspective, the most critical thing for any party to a contract to appreciate is the importance of...
Read More
Business Law / Mortgages, Loans & Finance / Mezzanine Finance

Private lending: the red flags

Today, it may appear amicable and you do not foresee anything going wrong after the money is advanced Surely, it’s...
Read More
Business Law / Commercial Contracts & Agreements / Corporate Advisory and M&A

Negotiating Indemnities: Some Practical Tips

An appropriate indemnity can provide a valuable mechanism for risk allocation between parties to commercial dealings...
Read More
Business Law / Property & Development / Developments

TLFC Law Triple Finalists in the Lawyers Weekly Australian Law Awards 2019

Celebrating its 19th year, the Australian Law Awards, in partnership with UNSW Law, is the pinnacle of award programs...
Read More
Business Law / Franchising & Licensing / Real Estate Agents

Thinking of buying or selling a Rent Roll?

However, rent rolls are regulated by the Estate Agent’s Act and it is important that the contract to buy or sell the...
Read More
Information Technology & Innovation / Developments / Business Law

Cyber Security and Protection from Cyber Fraud

Email communication is an inherent part of modern day business It is not uncommon to run an entire transaction online,...
Read More
Employment Law / Business Law / Litigation & Dispute Resolution

What employers need to know when letting someone go

A staff member may need to be let go because the business can no longer afford them, or perhaps they are just not...
Read More
Business Law / Leasing & Lease Disputes / Real Estate Agents

Retail Leases Update for Agents and Landlords

Pursuant to Section 15 of the Retail Leases Act 2003 (Vic), as soon as a landlord enters into negotiations with a...
Read More
Business Law / Personal Property Securities / Small to Medium Enterprises

Personal Property Securities Register (PPSR) Celebrates its 7th Birthday

Financiers who have registered security interests on the PPSR should be aware of this date, as seven-year registrations...
Read More
Business Law / Property & Development / International Investors

Self Managed Superannuation Funds and Property Investment Part 2: Stamp Duty when Transferring Property Assets

Whether the SMSF has purchased this property outright or though the assistance of a Limited Recourse Borrowing...
Read More
Business Law / Property & Development / International Investors

Self-Managed Superannuation Funds and Property Investment Part 1: Using Borrowed Funds for Real Property Investment

There are potentially numerous benefits for purchasing property via a SMSF including asset protection and concessional...
Read More