Hot on the tail of last year’s changes to the Franchising Code of Conduct aimed at improving transparency and protection to franchisees within the franchising industry, the Federal Government also passed the Treasury Laws Amendment (2021 Measures No.6) Bill 2021 which amongst other things results in significant increases in penalties for contraventions of the Franchising Code of Conduct.
Per the new Subsection 51AE(2) of the Competition and Consumer Act 2010 (Cth), franchisors who infringe upon the Franchising Code of Conduct will now face penalties amounting to the greater of the following:
1) $10 million;
2) three times the value of the benefit that caused the breach; or
3) 10% of the franchisor’s yearly turnover for the 12 months prior to the breach.
Further, breaches by an individual franchisor (who is not a body corporate) will attract a financial penalty of $500,000. If the Franchising Code of Conduct does not prescribe a financial penalty for contravention of a specific civil penalty provision, the new legislation also introduces an increased pecuniary penalty of maximum 600 penalty units. Under the current value of a penalty unit, such fines will amount to a maximum penalty of $133,200.
Whilst the top end of the penalties are likely to be reserved for serious and systemic breaches, there has been a clear favour of these recent changes to the Franchising Code of Conduct and now the penalties for contravention that show the Government means business. Now is as good a time as any to consider a legal health check of your franchise system and make sure you implement any changes to ensure your system is compliant and avoids getting hit with the much larger stick the Government now wields.
Hitch Advisory is well placed to assist with a legal health check of your franchise system.