There was no legislation specifically applying to franchising until the introduction of the Franchising Code of Conduct (“the Code”) in 1998. Until then, the law treated the relationship between franchisors and franchisees just like any other contract, and treated each franchised business as a separate business.

The current version of the Franchising Code of Conduct (Sch 1 , Competition and Consumer (Industry Codes-Franchising) Regulation 2014 (Cth)) is the pivotal legislation governing franchising in Australia. It was enacted under legislation now known as the Competition and Consumer Act 2010 (Cth). That Act gives it the force of law, and contains the provisions for the enforcement of the Code.

Even before the advent of franchising, trade mark law had long recognised the ownership by one party of a trade mark, the use of which can be licensed to other parties. This includes the concept of licensing a trade mark to different parties to use in different geographical locations. Accordingly, the long-standing trade mark law fits perfectly with the modern franchising business model.

However, many aspects of the law still have not caught up to the franchising model. For example, the Business Names Registration Act 2011 (Cth) requires that the “Entity” carrying on a business under a business name must register that business name. However, in a franchising business model, the franchisor and each of the franchisees are all separate entities, all carrying on business under the same business name. The Act does not accommodate this. Because of the importance franchisors place on their business names, they generally ignore this legislative requirement.

The Australian Consumer Law already contains provisions to protect consumers from unfair terms in standard form contracts. The Australian Securities and Investments Commission Act 2001 (Cth) contains substantially identical provisions protecting consumers from contracts for the supply of financial services and financial products.

On 12 November 2016, the same provisions were extended to "small business contracts". These are defined widely enough to catch the vast majority of franchise agreements. This means that many of the terms commonly found in franchise agreements entered into after 12 November 2016 are void. Examples of such unfair terms include provisions to allow the franchisor unilaterally to change the terms of the agreement, to vary the goods or services supplied under the agreement, or the prices for those goods or services.

Even though franchises form a very important part of the Australian business scene, there is very little other legislation specifically dealing with franchises. In general, the public regard these businesses made up of a number of franchisees all selling substantially identical goods and services in the same manner and under the same trade mark and other marketing material as being one large business. Certainly, the advertising of franchised businesses treats them as if they were one conglomerate, even though they are legally regulated as separate entities.

See Laws relating to franchising.

However franchises are subject to the same legislation as all other businesses and such legislation may operate differently because of the peculiarities of the franchising structure. The reason why wage frauds by 7-Eleven franchisees came to light was in part because of widespread investigations by the Fair Work Ombudsman — followed up by a joint investigation by ABC’s Four Corners and BusinessDay.

Despite it being revealed that the Australian 7-Eleven master franchisee was aware of ongoing payroll issues at 69 stores, all action by the FWO has apparently been against individual franchisees.

Pressure on the privately-held master franchise has come from threats of being called before a Senate enquiry (followed by belated offers to pay the workers what they should have received in wages) and of a class action by franchisees. Steps are being taken to change the 7-Eleven business model. What is really needed is an amendment to the legislation to impose responsibility on the owners of master franchises for systemic abuses by franchisees that they fail or refuse to control.

The ACCC is responsible for enforcing compliance with the Competition and Consumer Act 2010 (Cth), including the Code.

The ACCC is flooded with complaints each year, including hundreds of complaints relating to breaches of the Code. It does not have the resources to deal with all of these and, accordingly, it is of little assistance to an individual franchisee seeking to enforce compliance with the Code.

See Australian Competition and Consumer Commission.

The Competition and Consumer Act 2010 (Cth) prohibits “exclusive dealing”. Many of the common practices of franchisors breach these provisions. This includes requiring franchisees to acquire supplies from the franchisor or from suppliers nominated by the franchisor. It also includes directing franchisees not to sell products other than those nominated by the franchisor.

Franchisors may be relieved from the impact of these requirements by:

• obtaining authorisation from the ACCC for their activities; or

• notifying the ACCC of the franchisor’s intentions to engage in exclusive dealing. This is by far the more common way of overcoming the problem. Provided that the franchisor lodges such notification at least 14 days before engaging in the relevant conduct, its conduct will not be considered to breach the Act, unless the ACCC takes action. Because of the ACCC’s limited resources, it rarely takes steps to prevent a franchisor from engaging in exclusive dealing.

See Legislative requirements.