From 1 November 2025, the grace period is over for franchisors as new disclosure obligations under the Franchising Code of Conduct take effect.
At Legalite, our commercial team has been working alongside franchisors to prepare for the Franchising Code of Conduct first updates introduced in April 2025. These reforms are in response to ongoing challenges across Australia’s billion-dollar franchise industry – with a renewed focus on increasing fairness, transparency and accountability to assist franchisees in making informed decisions.
If you’re a franchisor, you are likely already aware of your yearly obligation to update your Disclosure Document – this must be completed within 4 months of the end of the financial year (this is before 31 October for most franchisors).
Consider this your friendly legal reminder to review and update your Disclosure Document to ensure it complies with the new Franchising Code of Conduct.
Here’s What You Need to Know and Action by 31 October 2025
Unlike Cinderella, there’s no chance to reclaim your slipper or ask for extra time once the clock strikes midnight. The ACCC will not grant any fairytales for non-compliance with the Code, and the penalties for breach are very real.
Legalite has previously provided a detailed breakdown of the updated Franchising Code of Conduct. You can read our full breakdown here, but here’s a brief compliance summary:
1. Disclosure of Significant Capital Expenditure
Disclosure Documents must now provide more clear and specific details of any significant capital expenditure they require of franchisees during the term of their franchise agreement.
2. Specific Purpose Funds
The new Code broadens the scope of what were previously known as marketing or cooperative funds, introducing the concept of specific purpose funds. These are any funds managed or controlled by a franchisor that franchisees are required to contribute to, and which must be used for a defined, shared purpose. These types of funds may include a marketing fund or a technology fund.
From 1 November, franchisors must prepare annual financial statements, arrange for the statements to be audited (unless 75% of franchisees vote that an audit is not necessary) and comply financial disclosure requirements for each specific purpose fund franchisees are required to contribute to. For franchisors managing multiple funds, now is the time to identify which funds may fall under the new definition and ensure compliance ahead of the changes.
3. Reasonable Opportunity for Return on Investment
The new Code requires that a franchisor must not enter into a franchise agreement unless that agreement provides the franchisee with a reasonable opportunity to make a return, during the term of the franchise agreement, on any investment required by the franchisor as part of entering into, or under, the franchise agreement.
In other words, this means franchisors should be ready to show that what they’re asking from franchisees in terms of initial investment, capital expenditure and working capital is reasonable in the context of the franchise’s overall terms and business model
4. Compensation for Early Termination
From 1 November 2025, agreements must also provide for compensation payable to franchisees where a franchisor terminates a franchise agreement early because it:
(i) withdraws from the Australian market;
(ii) rationalises its networks in Australia; or
(iii) changes its distribution models in Australia.
The franchise agreement must specify how this compensation is calculated, which must have specific reference to:
(i) lost profit from direct and indirect revenue;
(ii) unamortised capital expenditure requested by the franchisor;
(iii) loss of opportunity in selling established goodwill; and
(iv) costs of winding up the franchised business.
As always, franchisors must keep their Disclosure Documents accurate, current and transparent to avoid misleading or deceiving franchisees, especially if there has been significant system or structural changes throughout the year.
The Takeaway: Compliance is Non-Negotiable
The deadline for Disclosure Document updates and compliance is fast approaching on 31 October 2025. Franchisors who fail to comply risk significant financial penalties and enforcement action from the ACCC.
Knowledge is power. Taking the time now to review and update your Disclosure Document is the simplest and most effective way to protect your business.
If you need support to prepare or review your Disclosure Document before the deadline, our commercial team is here to help. At Legalite, we work with franchisors across retail, food, home services, education, property and fitness, from emerging concepts to national networks, ensuring they are fully disclosure ready and compliant under the Franchising Code of Conduct.
Contact our commercial team today at hello@legalite.com.au if you have any questions and to ensure your Disclosure Document is compliant with the new Franchising Code of Conduct requirements.