What the 2025 Franchising Code Changes Mean for Franchisors and Franchisees - Awelle
Reviewed by Lisa M ·
Short answer: A new Franchising Code of Conduct replaced the 2014 Code on 1 April 2025. It applies to franchise agreements entered into, renewed, extended or…
Lisa Muscatello's avatar
Lisa Muscatello
By Lisa Muscatello, Founder & Legal Director, Awelle — Australian lawyer, ~25 years in commercial law.
Short answer: A new Franchising Code of Conduct replaced the 2014 Code on 1 April 2025. It applies to franchise agreements entered into, renewed, extended or transferred on or after that date. A second group of obligations — significant capital expenditure disclosure, expanded specific purpose fund rules, return-on-investment and early-termination compensation — applies to agreements entered into, renewed, extended or transferred on or after 1 November 2025. Agreements not touched since before 1 April 2025 stay under the old Code until they are renewed, extended or transferred.
Key facts
- 1 April 2025: new Code commences; the 2014 Code is repealed for new, renewed, extended and transferred agreements.
- 1 November 2025: capital expenditure, specific purpose fund, return-on-investment, early-termination compensation and cooling-off opt-out rules apply to agreements made or varied from this date.
- Penalties: up to 600 penalty units for breaches of key obligations. The dollar value of a penalty unit is indexed — check the current Commonwealth figure.
- Special circumstances termination: now requires 7 days’ written notice, and for some grounds the franchisee can dispute the termination before it takes effect.
- Restraints: post-term restraints cannot be enforced where a compliant franchisee asked to renew on substantially the same terms, was refused, and received no or inadequate goodwill compensation.
Which Code applies to my agreement?
| Agreement entered into, renewed, extended or transferred | Code that applies |
|---|---|
| Before 1 April 2025 (and not since renewed, extended or transferred) | 2014 Code |
| On or after 1 April 2025 | New Code (core obligations) |
| On or after 1 November 2025 | New Code, including the 1 November 2025 obligations |
What changed on 1 April 2025
Termination in special circumstances
This is the change most often misunderstood. Under the 2014 Code, a franchisor could terminate without notice in listed special circumstances (for example fraud, abandonment, or endangering public health or safety). Under the new Code, the franchisor must give 7 days’ written notice. The list of grounds has grown to include court findings of serious Fair Work contraventions and certain Migration Act contraventions.
For some grounds — including abandonment, fraud and endangering public health or safety — the franchisee can give a dispute notice within the 7 days, which delays termination while the dispute process runs. Skipping that process exposes the franchisor to civil penalties. For franchisors, this is a slower and more procedural path than before, not a faster one.
Restraint of trade after expiry
A franchisor cannot enforce a post-term restraint if all of these apply: the agreement had a renewal or extension option; the franchisee asked to renew on substantially the same terms before expiry; the franchisee met the renewal conditions, was not in serious breach and had not misused IP or confidential information; the franchisor refused; and the franchisee received no, or only nominal, compensation for goodwill. Restraints can still apply where the agreement ended early because of the franchisee’s breach.
Civil penalties
More obligations now carry civil penalties of up to 600 penalty units, and the ACCC has broader enforcement tools.
What changed on 1 November 2025
- Significant capital expenditure: the disclosure document must set out expected significant capital expenditure — reason, amount, timing, nature, expected outcomes and risks — and franchisors must discuss it with prospective franchisees. Refurbishments, relocations, rebranding and technology upgrades are typical examples.
- Specific purpose funds: the rules now cover marketing, technology, refurbishment, training, sustainability and similar funds. Funds must be held in a separate account, franchisor-owned units contribute on the same basis, and an annual financial statement (audited unless 75% of contributing franchisees vote otherwise) must be prepared within 4 months of year end and given to franchisees within 30 days.
- Reasonable opportunity to make a return on investment: the agreement’s term and commercial settings must give the franchisee a reasonable opportunity to recoup its investment. It is not a profit guarantee.
- Compensation for early termination: agreements must provide compensation if the franchisor ends or doesn’t renew because it withdraws from Australia, rationalises the network, or changes its distribution model — covering lost profit, unamortised required capex, goodwill and wind-up costs, plus buy-back of specified stock and non-repurposable branded equipment.
- Cooling-off opt-out: a franchisee can opt out of the 14-day cooling-off period in limited cases, such as a recent substantially similar agreement with the same franchisor for the same business.
What franchisors should do now
- Map every agreement to the table above, and diarise renewal, extension and transfer dates.
- Update disclosure documents for capital expenditure and specific purpose fund content.
- Rewrite termination clauses and internal procedures for the 7-day notice and dispute process.
- Add early-termination compensation and buy-back clauses to agreements made or varied from 1 November 2025.
- Review post-term restraints and renewal option wording together.
What franchisees should check
- Which Code applies to your agreement — the answer changes on renewal, extension or transfer.
- Whether the disclosure document explains upcoming capital expenditure.
- Whether marketing and other funds are held separately and reported on annually.
- Whether your term realistically lets you recover your investment.
Need a Code-compliant franchise agreement or disclosure document? Awelle generates franchising documents from clauses written by Australian lawyers, and you can book a lawyer for advice on your network.
Frequently asked questions
When did the new Franchising Code start?
1 April 2025. Additional obligations apply to agreements entered into, renewed, extended or transferred on or after 1 November 2025.
Does the new Code apply to my existing franchise agreement?
Only once it is renewed, extended or transferred on or after 1 April 2025. Until then the 2014 Code continues to apply.
Can a franchisor still terminate immediately for fraud or abandonment?
No. The new Code requires 7 days’ written notice, and for grounds such as fraud, abandonment and endangering public health or safety, the franchisee can dispute the termination within that period.
Are restraint of trade clauses still enforceable?
Generally yes, but not where a compliant franchisee sought renewal on substantially the same terms, was refused, and received no or inadequate goodwill compensation.
What is the penalty for breaching the Code?
Up to 600 penalty units for key obligations. The value of a penalty unit is indexed, so check the current figure.
Sources
- ACCC — Guidance on changes to the franchising code
- ACCC — 2025 Franchising Code changes (13 October 2025)
- Competition and Consumer (Industry Codes—Franchising) Regulations 2024 (Cth)
This article is general information, not legal advice. Get advice on your specific agreement.