From 1 April 2025, Australia introduced a new version of the Franchising Code of Conduct, which applies across all states, including Victoria. Some rules will become fully active from 1 November 2025.
These updates are designed to make franchise relationships fairer, clearer, and more transparent for both franchisees and franchisors.
At Shawn Mendis Lawyers, we guide business owners, investors, and franchisors through these changes, ensuring all agreements stay compliant with the new Code.
Key Changes in the New Franchising Code
1. Non-Compete (Restraint of Trade) Clauses
Franchisors can no longer include a restraint of trade clause if a franchisee requests renewal or extension and the franchisor refuses. If you wanted to renew and the franchisor declined, you are now free to start a similar business without restriction.
2. Fair Opportunity to Recover Investment
From 1 November 2025, all franchise agreements must give the franchisee a reasonable opportunity to earn back their investment. It does not guarantee profit but ensures fair conditions to recover the money spent.
3. Clear Disclosure of Major Costs
Franchisors must clearly list all major future costs, such as fit-outs or refurbishments, including the purpose, timing, and risk. This allows franchisees to make informed financial decisions before signing.
4. Compensation for Early Termination
If a franchisor ends a contract early, for example, by closing operations or leaving the Australian market, they must include a fair compensation formula in the agreement.
5. Higher Penalties and Stricter Compliance
Penalties have increased significantly. The ACCC now has greater power to act against franchisors who do not meet their disclosure and fairness obligations.
6. Transition Period
Agreements signed before 1 April 2025 stay under the old Code until renewal or transfer. Any agreement signed or renewed after 1 April 2025 must follow the new Code.
Why This Matters in Victoria
The Franchising Code applies nationally, but Victorian businesses will feel the changes directly.
For franchisees, this means stronger legal protection and clear cost transparency.
For franchisors, it means updating disclosure documents, agreements, and internal policies to meet the new Code.
Our team at Shawn Mendis Lawyers helps Victorian franchisors and franchisees align their agreements with the 2025 standards.
Example: Old Code vs New Code
Scenario
Franchisor BrewMate Coffee offers a franchise to Emma’s Café Pty Ltd in Melbourne.
Under the Old Code
Emma signs a five-year agreement. The franchisor controls renewal and includes a non-compete rule preventing Emma from opening any café within ten kilometres for two years after the contract ends.
The disclosure document lists expected profits but does not mention that all stores must complete a $200,000 refurbishment after three years. There is no promise of compensation if BrewMate Coffee exits the market early.
Two years later, BrewMate Coffee closes its Australian stores, leaving Emma with debt from her recent refurbishment and no legal protection.
Under the New Code
Now, BrewMate Coffee must follow the 2025 changes.
- If Emma requests renewal and the franchisor refuses, the non-compete rule cannot apply.
- The disclosure must clearly list the $200,000 fit-out, explain why it is needed, and outline risks.
- The agreement must offer Emma a fair chance to recover her investment during the five-year term.
- If BrewMate Coffee ends the contract early, the agreement must include a formula for fair compensation.
Result
Emma has stronger protection and clearer financial expectations. BrewMate Coffee must be transparent, fair, and responsible in managing its franchise network.
How Shawn Mendis Lawyers Can Help
We assist:
✅ Franchisees – reviewing or signing new agreements
✅ Franchisors – updating documents and disclosure statements
✅ Businesses – planning to expand through franchising
Our services include:
- Drafting and reviewing franchise agreements and disclosure documents
- Compliance checks with the new Franchising Code
- Advice on renewal, termination, or compensation rights
Talk to a Trusted Franchise Lawyer
Franchising is a great way to grow a business, but it comes with legal responsibilities. The new Code helps protect both parties, but understanding it properly is essential.
At Shawn Mendis Lawyers, we offer clear, practical advice to help you make confident business decisions.
Contact Us
📍 1/198 Henry Road, Pakenham VIC 3810
📞 03 8774 9663
✉️ contact@shawnmendislawyers.au
🌐 www.shawnmendislawyers.au
