The Franchise Memorandum

On June 3, 2010, the Australian federal government released new amendments to the Franchising Code of Conduct. The changes will take effect July 1, 2010. Some significant changes that franchisors need to be aware of include the requirement to:  (1) inform franchisees, at least six months prior to the end of the franchise agreement, of the franchisor's decision regarding the renewal of the franchise agreement; (2) disclose all payments that a franchisee may be required to make to third parties, where the expenditure is within the knowledge or control of, or is reasonably foreseeable by, the franchisor; (3) disclose whether the franchisor will require the franchisee to undertake any unforeseen significant capital expenditure that was not previously disclosed by the franchisor; (4) disclose the circumstances in which the franchisor has unilaterally varied a franchise agreement in the last three financial years and the circumstances in which the franchise agreement may be unilaterally varied in the future (there is no requirement to disclose unilateral variations that occurred before July 1, 2010); (5) disclose the details of the franchisee’s rights at the end of the franchise agreement’s term, including disclosing the franchisor’s rights to acquire the franchisee’s business; and (6) disclose whether the franchisor will amend the franchise agreement on or before transfer or novation of the franchise.