Franchising

Points worth knowing

• The Code is compulsory. The Franchising Code of Conduct is a mandatory industry code under the Competition and Consumer Act. A new Code applies to franchise agreements entered into, transferred, renewed or extended on or after 1 April 2025.
• Documents before signing. The franchisor must give a prospective franchisee a copy of the franchise agreement in the form in which it is to be signed, the disclosure document and a copy of the Code, and must not sign the agreement until 14 days after the last of those documents was given. Any payment made during that 14-day period must be refunded within 14 days of a written request.
• Independent advice is built in. The franchisor cannot sign unless it has received signed statements that you obtained advice from an independent lawyer, an independent business adviser and an independent accountant, or that you knew you should and chose not to.
• Cooling off. A franchisee may terminate a new franchise agreement within 14 days after entering into it, with a further 14-day right tied to receiving the terms of any lease from the franchisor. The franchisor must then repay what you have paid within 14 days, less reasonable expenses that the agreement sets out.
• Good faith. Each party must act towards the other in good faith in relation to the agreement and the Code, and the obligation applies during negotiations too. It does not stop either side from pursuing its legitimate commercial interests.
• End of term. For a term of 6 months or longer, the franchisor must tell you in writing at least 6 months before the end of the term whether it intends to extend, enter into a new agreement or neither. A franchisor cannot include a restraint of trade that would bite after expiry where you sought renewal on the same terms, met the conditions, were not in serious breach and were given no genuine compensation for goodwill.
• Termination for breach. Unless the ground is one of the listed serious grounds, the franchisor must give written notice stating the breach, what is required to fix it and a reasonable time to do so, which need not be more than 30 days, and cannot terminate if the breach is fixed within that time. For the listed serious grounds, such as losing a required licence or becoming insolvent, 7 days' written notice is required. For abandonment, fraud or conduct endangering public health or safety the franchisor must also give written notice, and if you raise a dispute within the notice period it cannot terminate until 28 days after your dispute notice.
• Costs the franchisor cannot pass on. The franchisor cannot require you to pay its legal costs of preparing the agreement, beyond a fixed amount written into the agreement that does not exceed its genuine costs, or its costs of settling a dispute.
• Disputes. Either party may give written notice of a dispute; if it is not resolved within 21 days, either may refer it to an alternative dispute resolution practitioner, and the parties share the cost equally unless they agree otherwise.

Common questions