---
title: "Franchising & Distribution"
url: "https://ailawframework.com/practice/franchising-and-distribution"
type: "practice_area"
site: "AI Law Framework"
id: "A34"
task_count: 22
last_reviewed: "2026-10-10"
---

# Franchising & Distribution

> Review the complete franchise or distribution relationship against the relevant code and commercial documents. Check disclosure, financial representations, renewal and exit terms, and the client’s circumstances.

Canonical page: https://ailawframework.com/practice/franchising-and-distribution  
Last reviewed: 2026-10-10

Site index for agents: https://ailawframework.com/llms.txt

Also covers: Franchise law; dealer/distribution agreements; licensing and merchandising; dealership law; commercial agency; franchise disputes; Code compliance; franchisee due diligence

## Key facts

- Tasks: 22
- Green: 5, Yellow: 11, Red: 6
- Levels: Green is AI drafts and the lawyer checks; Yellow is lawyer and AI draft together; Red is the lawyer writes and AI may only check, clarify or collect data.

## Principles

- **Define the matter**: Confirm the client’s instructions, jurisdiction, intended output and the information available before dividing the work.
- **Verify the authorities**: Open each relied-on authority independently. Confirm its existence, current status, proposition and any quotation or pinpoint reference.
- **Reconcile the figures**: Trace every relied-on figure to its source, confirm dates and assumptions, and independently recalculate totals or derived amounts.

## Checklist

- Open each relied-on authority independently. Confirm its existence, current status, proposition and any quotation or pinpoint reference.
- Trace every relied-on figure to its source, confirm dates and assumptions, and independently recalculate totals or derived amounts.
- Review operative clauses in the complete document, including definitions, cross-references, schedules and inconsistencies with the instructions.
- Confirm that the actual tool, feature and processing terms permit use of this information, including access, retention, training and disclosure conditions.
- Obtain and inspect the relevant current official register or search result. Confirm identities, interests and the date and scope of the search.
- Verify the applicable jurisdiction and the version of each relevant law, rule or instrument in force at the material time.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.

## Restrictions

- Confirm firm, client and applicable court or professional restrictions before using any AI feature.

## Jurisdiction note

Apply this guidance to the actual matter and jurisdiction. Confirm current requirements before relying on an example.

## Basis

Practice guidance supports planning; the responsible lawyer confirms the scope, evidence and review requirements for the matter.

Also covers: Franchise law; dealer/distribution agreements; licensing and merchandising; dealership law; commercial agency; franchise disputes; Code compliance; franchisee due diligence

Australian franchising practice operates under a mandatory industry code — the Franchising Code of Conduct 2025 (effective 1 April 2025, with further provisions from 1 November 2025) made under the Competition and Consumer Act 2010 (Cth) — layered over the Australian Consumer Law, the CCA's exclusive dealing and cartel provisions, and state-based contract law. Distribution law intersects through the CCA's exclusive dealing regime (s 47), third-line forcing (post-2017 requires substantial lessening of competition), resale price maintenance (s 48, per se prohibited), and cartel conduct provisions. The AI risk profile is high: the Code contains numerous precisely-dated, format-specific and penalty-bearing obligations; disclosure documents must track a prescribed model; the Franchise Disclosure Register is ACCC-administered with active infringement-notice enforcement (Cash Converters and MTA $16,500 each; HN Macgregor/Harvey Norman $15,650; Luxottica/OPSM $19,800, all 2024-2025); the 2025 Code introduced new goodwill compensation, early termination compensation (s 43) and return on investment (s 44) obligations with 1 November 2025 commencement — provisions so new that most AI models will not know them and will silently apply the superseded 2014 Code regime, creating acute hallucination-harm vectors where a wrong date, superseded provision or misattributed penalty amount flows directly to client detriment.

## Limits on AI assistance

Red lines — never in this area

## Limits on AI assistance

AI must never generate a citation to a franchising case, ACCC decision, or Code provision and have that citation used in a court document, advice letter or client communication without independent verification against Austlii, Jade or a verified legal database. The correct Australian AI-citation precedent is Dayal [2024] FedCFamC2F 1166 (not Handa & Mallick [2024] FedCFamC2F 957, which is the underlying family law matter) — the solicitor's practising certificate was varied on 19 August 2025 for submitting unverified AI-generated citations. Hallucination rates of 17-88% make unverified citation a disciplinary and professional negligence risk. AI must never determine whether a specific post-term restraint of trade clause is enforceable under the post-1 April 2025 Code regime — 'genuine compensation for goodwill' is undefined in the Code, has no settled case law, and AI output on this topic is structurally unreliable. AI must never draft a franchise agreement, FDD or franchise termination notice and present it to the client as ready to issue. All three are statutory-form or penalty-bearing instruments: (a) the FDD must match the prescribed ACCC model and all Code mandated items; (b) the franchise agreement must now include s 43 and s 44 obligations for post-November 2025 agreements; (c) procedural errors in a Code-compliant termination void the termination and expose the client to damages and potential contempt. AI must never classify whether an arrangement is a 'franchise agreement' within the Code's definition without lawyer confirmation — misclassification exposes clients to unanticipated Code obligations or deprives franchisees of Code protections. AI must never advise on or omit the s 44 return on investment obligation or s 43 early termination compensation obligation for franchise agreements entered into, transferred, renewed or extended on or after 1 November 2025 — both obligations are new, carry 600 penalty unit civil penalty exposure, and are absent from most AI training data. AI must never calculate or advise on current penalty unit amounts without the lawyer verifying the current value of a Commonwealth penalty unit against s 4AA Crimes Act 1914 (Cth) — the value was $330 from 7 November 2024 and will be indexed on 1 July 2026; penalty advice with wrong figures creates direct client detriment. AI must never input client-confidential information (FDD contents, financial data, franchisee identities, dispute details) into a public generative AI tool — ASCR r 9.1 confidentiality obligations apply; privilege may be lost; APPs may be breached. Under NSW Supreme Court Practice Note SC Gen 23 (3 February 2025), confidential or sensitive information must not be entered into a generative AI program unless the practitioner is satisfied it will remain in a controlled environment and not be used for model training. AI must never advise that third-line forcing under s 47(6)-(7) CCA is per se prohibited — the per se prohibition was removed in November 2017; the current test is SLC. Advice applying the pre-2017 position is wrong in Australian law. AI must never apply US or EU franchise law concepts, EU distribution block exemptions, or US franchise relationship statutes to Australian practice — these have no direct application and will actively mislead on franchisee rights, RPM analysis and competition law exposure. AI must never assess whether an ACCC enforcement risk is low or manageable — the ACCC received $7.1m in 2025-26 Budget funding specifically for franchising enforcement; AI risk assessments in this area are likely to be optimistic and could mislead clients.

- AI must never generate a citation to a franchising case, ACCC decision, or Code provision and have that citation used in a court document, advice letter or client communication without independent verification against Austlii, Jade or a verified legal database. The correct Australian AI-citation precedent is Dayal [2024] FedCFamC2F 1166 (not Handa & Mallick [2024] FedCFamC2F 957, which is the underlying family law matter) — the solicitor's practising certificate was varied on 19 August 2025 for submitting unverified AI-generated citations. Hallucination rates of 17-88% make unverified citation a disciplinary and professional negligence risk.
- AI must never determine whether a specific post-term restraint of trade clause is enforceable under the post-1 April 2025 Code regime — 'genuine compensation for goodwill' is undefined in the Code, has no settled case law, and AI output on this topic is structurally unreliable.
- AI must never draft a franchise agreement, FDD or franchise termination notice and present it to the client as ready to issue. All three are statutory-form or penalty-bearing instruments: (a) the FDD must match the prescribed ACCC model and all Code mandated items; (b) the franchise agreement must now include s 43 and s 44 obligations for post-November 2025 agreements; (c) procedural errors in a Code-compliant termination void the termination and expose the client to damages and potential contempt.
- AI must never classify whether an arrangement is a 'franchise agreement' within the Code's definition without lawyer confirmation — misclassification exposes clients to unanticipated Code obligations or deprives franchisees of Code protections.
- AI must never advise on or omit the s 44 return on investment obligation or s 43 early termination compensation obligation for franchise agreements entered into, transferred, renewed or extended on or after 1 November 2025 — both obligations are new, carry 600 penalty unit civil penalty exposure, and are absent from most AI training data.
- AI must never calculate or advise on current penalty unit amounts without the lawyer verifying the current value of a Commonwealth penalty unit against s 4AA Crimes Act 1914 (Cth) — the value was $330 from 7 November 2024 and will be indexed on 1 July 2026; penalty advice with wrong figures creates direct client detriment.
- AI must never input client-confidential information (FDD contents, financial data, franchisee identities, dispute details) into a public generative AI tool — ASCR r 9.1 confidentiality obligations apply; privilege may be lost; APPs may be breached. Under NSW Supreme Court Practice Note SC Gen 23 (3 February 2025), confidential or sensitive information must not be entered into a generative AI program unless the practitioner is satisfied it will remain in a controlled environment and not be used for model training.
- AI must never advise that third-line forcing under s 47(6)-(7) CCA is per se prohibited — the per se prohibition was removed in November 2017; the current test is SLC. Advice applying the pre-2017 position is wrong in Australian law.
- AI must never apply US or EU franchise law concepts, EU distribution block exemptions, or US franchise relationship statutes to Australian practice — these have no direct application and will actively mislead on franchisee rights, RPM analysis and competition law exposure.
- AI must never assess whether an ACCC enforcement risk is low or manageable — the ACCC received $7.1m in 2025-26 Budget funding specifically for franchising enforcement; AI risk assessments in this area are likely to be optimistic and could mislead clients.

## Jurisdiction-specific considerations

Australian traps

## Jurisdiction-specific considerations

The Franchising Code of Conduct 2025 (Competition and Consumer (Industry Codes — Franchising) Regulations 2025) replaced the 2014 Code on 1 April 2025, with further provisions commencing 1 November 2025. Many AI models are trained on the prior Code and will silently apply it without warning. Any AI output referencing Code provisions must be verified against the current instrument on the Federal Register of Legislation (legislation.gov.au). The 1 November 2025 tranche (s 43 early termination compensation, s 44 return on investment, specific purpose fund obligations, significant capital expenditure disclosures, cooling-off opt-out provisions) is likely outside the training data of most AI models as at mid-2026. CASE CITATION TRAP: The correct Australian AI-citation disciplinary precedent is Dayal [2024] FedCFamC2F 1166, NOT Handa & Mallick [2024] FedCFamC2F 957. Handa & Mallick is the underlying family law case in which the AI-hallucinated authorities were tendered. The disciplinary referral case is Dayal. Using the wrong citation in legal work is itself an example of the error the precedent warns against. The Victorian Legal Services Board varied the solicitor's practising certificate on 19 August 2025 to prohibit unsupervised practice as a principal. The ACCC administers the Franchise Disclosure Register from October 2025 (previously ASIC-administered). Infringement notices issued 2024-2025 for Register non-compliance: Cash Converters ($16,500); MTA — Mobile Travel Agents ($16,500); HN Macgregor Franchisor Pty Ltd / Harvey Norman ($15,650); Luxottica Franchising Australia / OPSM and Laubman & Pank ($19,800). Penalty unit value was $330 from 7 November 2024, indexed on 1 July 2026 — confirm current value at time of advice. Post-term restraints: the 2025 Code (1 April 2025 commencement) prohibits franchise agreements from including a post-term restraint of trade clause that would be enforceable in circumstances where the franchisee sought renewal or extension, met all conditions, and the franchisor refused without genuine goodwill compensation. 'Genuine compensation for goodwill' is undefined in the Code and unsettled in case law as at mid-2026. AI output on this topic is structurally unreliable. Breach by the franchisor of this obligation attracts a 600 penalty unit civil penalty ($198,000 at current rate). This provision applies only to agreements entered into, transferred, renewed or extended on or after 1 April 2025. Section 44 return on investment obligation (1 November 2025): franchise agreements entered into, transferred, renewed or extended on or after 1 November 2025 must give franchisees a reasonable opportunity to make a return on any investment required by the franchisor during the term. Previously this obligation applied only to new vehicle dealership agreements. Its absence from a post-November 2025 agreement makes the agreement Code non-compliant. AI models trained before November 2025 will not know this obligation exists. Section 43 early termination compensation obligation (1 November 2025): franchise agreements entered into, transferred, renewed or extended on or after 1 November 2025 must provide for compensation where the franchisor terminates early because it is exiting the Australian market, changing its distribution model in Australia, or restructuring its franchise network. This did not exist under the 2014 Code. AI will routinely omit this clause. The unfair contract terms (UCT) regime under the ACL (Part 2-3) applies to standard form franchise agreements with small businesses. The ACCC has designated franchising UCT as a 2025-26 enforcement priority, focusing on automatic renewals, unilateral variation rights, early termination fees and non-cancellation clauses. AI may not reflect the current enforcement posture or case law under the post-November 2023 penalty-bearing UCT regime. Third-line forcing under s 47(6)-(7) CCA is no longer per se prohibited since November 2017 — it now requires SLC. AI models may incorrectly state the prior per se prohibition still applies. Resale price maintenance (s 48 CCA) remains per se prohibited — AI trained on US or EU materials may incorrectly suggest a rule-of-reason or SLC approach applies; this is wrong in Australian law. NSW Supreme Court Practice Note SC Gen 23 (effective 3 February 2025): governs use of generative AI in NSW Supreme Court proceedings. Key restrictions relevant to franchise litigation: absolute prohibition on AI-generated content in affidavits, witness statements and character references; confidential or sensitive information must not be entered into a public AI program unless it will remain in a controlled data environment and not be used for model training. Other state and territory courts are developing their own guidelines — check jurisdiction-specific rules before any court filing. Dispute resolution under the Code: applicable procedure depends on which Code version governs the agreement. ASBFEO (Australian Small Business and Family Enterprise Ombudsman) is the correct mediation referral body — not the Fair Work Commission, ASIC, or any other body. All Code mediation preconditions must be exhausted before litigation in most circumstances; AI may not correctly identify these preconditions or may apply the wrong Code's procedure. Limitation periods: breach of Code obligations as civil penalty provisions under the CCA are subject to the CCA's six-year limitation period (s 82). Claims under s 18 ACL (misleading and deceptive conduct) have different limitation periods. Do not rely on AI for limitation period calculations in franchise disputes — verify independently.

- The Franchising Code of Conduct 2025 (Competition and Consumer (Industry Codes — Franchising) Regulations 2025) replaced the 2014 Code on 1 April 2025, with further provisions commencing 1 November 2025. Many AI models are trained on the prior Code and will silently apply it without warning. Any AI output referencing Code provisions must be verified against the current instrument on the Federal Register of Legislation (legislation.gov.au). The 1 November 2025 tranche (s 43 early termination compensation, s 44 return on investment, specific purpose fund obligations, significant capital expenditure disclosures, cooling-off opt-out provisions) is likely outside the training data of most AI models as at mid-2026.
- CASE CITATION TRAP: The correct Australian AI-citation disciplinary precedent is Dayal [2024] FedCFamC2F 1166, NOT Handa & Mallick [2024] FedCFamC2F 957. Handa & Mallick is the underlying family law case in which the AI-hallucinated authorities were tendered. The disciplinary referral case is Dayal. Using the wrong citation in legal work is itself an example of the error the precedent warns against. The Victorian Legal Services Board varied the solicitor's practising certificate on 19 August 2025 to prohibit unsupervised practice as a principal.
- The ACCC administers the Franchise Disclosure Register from October 2025 (previously ASIC-administered). Infringement notices issued 2024-2025 for Register non-compliance: Cash Converters ($16,500); MTA — Mobile Travel Agents ($16,500); HN Macgregor Franchisor Pty Ltd / Harvey Norman ($15,650); Luxottica Franchising Australia / OPSM and Laubman & Pank ($19,800). Penalty unit value was $330 from 7 November 2024, indexed on 1 July 2026 — confirm current value at time of advice.
- Post-term restraints: the 2025 Code (1 April 2025 commencement) prohibits franchise agreements from including a post-term restraint of trade clause that would be enforceable in circumstances where the franchisee sought renewal or extension, met all conditions, and the franchisor refused without genuine goodwill compensation. 'Genuine compensation for goodwill' is undefined in the Code and unsettled in case law as at mid-2026. AI output on this topic is structurally unreliable. Breach by the franchisor of this obligation attracts a 600 penalty unit civil penalty ($198,000 at current rate). This provision applies only to agreements entered into, transferred, renewed or extended on or after 1 April 2025.
- Section 44 return on investment obligation (1 November 2025): franchise agreements entered into, transferred, renewed or extended on or after 1 November 2025 must give franchisees a reasonable opportunity to make a return on any investment required by the franchisor during the term. Previously this obligation applied only to new vehicle dealership agreements. Its absence from a post-November 2025 agreement makes the agreement Code non-compliant. AI models trained before November 2025 will not know this obligation exists.
- Section 43 early termination compensation obligation (1 November 2025): franchise agreements entered into, transferred, renewed or extended on or after 1 November 2025 must provide for compensation where the franchisor terminates early because it is exiting the Australian market, changing its distribution model in Australia, or restructuring its franchise network. This did not exist under the 2014 Code. AI will routinely omit this clause.
- The unfair contract terms (UCT) regime under the ACL (Part 2-3) applies to standard form franchise agreements with small businesses. The ACCC has designated franchising UCT as a 2025-26 enforcement priority, focusing on automatic renewals, unilateral variation rights, early termination fees and non-cancellation clauses. AI may not reflect the current enforcement posture or case law under the post-November 2023 penalty-bearing UCT regime.
- Third-line forcing under s 47(6)-(7) CCA is no longer per se prohibited since November 2017 — it now requires SLC. AI models may incorrectly state the prior per se prohibition still applies. Resale price maintenance (s 48 CCA) remains per se prohibited — AI trained on US or EU materials may incorrectly suggest a rule-of-reason or SLC approach applies; this is wrong in Australian law.
- NSW Supreme Court Practice Note SC Gen 23 (effective 3 February 2025): governs use of generative AI in NSW Supreme Court proceedings. Key restrictions relevant to franchise litigation: absolute prohibition on AI-generated content in affidavits, witness statements and character references; confidential or sensitive information must not be entered into a public AI program unless it will remain in a controlled data environment and not be used for model training. Other state and territory courts are developing their own guidelines — check jurisdiction-specific rules before any court filing.
- Dispute resolution under the Code: applicable procedure depends on which Code version governs the agreement. ASBFEO (Australian Small Business and Family Enterprise Ombudsman) is the correct mediation referral body — not the Fair Work Commission, ASIC, or any other body. All Code mediation preconditions must be exhausted before litigation in most circumstances; AI may not correctly identify these preconditions or may apply the wrong Code's procedure.
- Limitation periods: breach of Code obligations as civil penalty provisions under the CCA are subject to the CCA's six-year limitation period (s 82). Claims under s 18 ACL (misleading and deceptive conduct) have different limitation periods. Do not rely on AI for limitation period calculations in franchise disputes — verify independently.

## Risks to address

How it goes wrong

## Risks to address

AI applies the 2014 Franchising Code of Conduct to an agreement entered after 1 April 2025, producing advice on obligations, procedures and penalties that have been replaced — particularly dangerous for disclosure document requirements, dispute resolution procedures and post-term restraint rules. AI is completely unaware of the s 44 return on investment obligation and s 43 early termination compensation obligation (both 1 November 2025 commencement) and produces a franchise agreement for a post-November 2025 transaction that omits both clauses — the agreement is non-compliant and the franchisor incurs 600 penalty unit exposure ($198,000 per breach) without ever knowing the obligation existed. AI cites Handa & Mallick [2024] FedCFamC2F 957 as the Australian AI-citation disciplinary precedent. This is the wrong citation — that is the underlying family law proceeding. The correct case is Dayal [2024] FedCFamC2F 1166. Using the wrong citation in a document about AI hallucination is itself an AI hallucination. AI hallucinates franchise case citations or attributes wrong holdings to real cases. Australian franchising case law is a relatively small corpus — AI models fill gaps with plausible-sounding but non-existent citations. Solicitors face disciplinary consequences for unverified AI citations: see Dayal [2024] FedCFamC2F 1166; Victorian LSBC variation of practising certificate 19 August 2025. AI advises that a post-term restraint of trade is enforceable without flagging the new 1 April 2025 goodwill compensation requirement — client relies on the restraint clause, fails to pay compensation, the clause is unenforceable and the client faces a $198,000 civil penalty and damages to the franchisee. AI incorrectly states that third-line forcing is per se prohibited under Australian law (the pre-November 2017 position), causing a client to unnecessarily abandon a lawful supply arrangement or seek unnecessary ACCC authorisation.

- AI applies the 2014 Franchising Code of Conduct to an agreement entered after 1 April 2025, producing advice on obligations, procedures and penalties that have been replaced — particularly dangerous for disclosure document requirements, dispute resolution procedures and post-term restraint rules.
- AI is completely unaware of the s 44 return on investment obligation and s 43 early termination compensation obligation (both 1 November 2025 commencement) and produces a franchise agreement for a post-November 2025 transaction that omits both clauses — the agreement is non-compliant and the franchisor incurs 600 penalty unit exposure ($198,000 per breach) without ever knowing the obligation existed.
- AI cites Handa & Mallick [2024] FedCFamC2F 957 as the Australian AI-citation disciplinary precedent. This is the wrong citation — that is the underlying family law proceeding. The correct case is Dayal [2024] FedCFamC2F 1166. Using the wrong citation in a document about AI hallucination is itself an AI hallucination.
- AI hallucinates franchise case citations or attributes wrong holdings to real cases. Australian franchising case law is a relatively small corpus — AI models fill gaps with plausible-sounding but non-existent citations. Solicitors face disciplinary consequences for unverified AI citations: see Dayal [2024] FedCFamC2F 1166; Victorian LSBC variation of practising certificate 19 August 2025.
- AI advises that a post-term restraint of trade is enforceable without flagging the new 1 April 2025 goodwill compensation requirement — client relies on the restraint clause, fails to pay compensation, the clause is unenforceable and the client faces a $198,000 civil penalty and damages to the franchisee.
- AI incorrectly states that third-line forcing is per se prohibited under Australian law (the pre-November 2017 position), causing a client to unnecessarily abandon a lawful supply arrangement or seek unnecessary ACCC authorisation.

## Review checklist

The lawyer's review checklist

## Review checklist

Verify the Code version: confirm whether the 2014 Code or the 2025 Code applies, and if the 2025 Code, whether the April 2025 tranche only or also the November 2025 tranche applies. AI citing the wrong Code version is a critical error — check by agreement date, transfer, renewal or extension date. Check all penalty figures: verify the current Commonwealth penalty unit value against s 4AA Crimes Act 1914 (Cth) (was $330 from 7 November 2024; indexed on 1 July 2026) and confirm the number of penalty units cited by AI matches the current Code provision. Verify all case citations independently: run every case name through Austlii or Jade before use. The disciplinary AI-citation precedent is Dayal [2024] FedCFamC2F 1166 — not Handa & Mallick [2024] FedCFamC2F 957, which is the underlying family law matter. Discard any citation AI cannot produce a verifiable neutral citation for. Check that the proposition attributed to the case is actually held in the judgment. Check s 43 and s 44 compliance for post-November 2025 agreements: confirm AI has identified and drafted compliant early termination compensation (s 43) and return on investment (s 44) clauses in any franchise agreement entered into, transferred, renewed or extended on or after 1 November 2025. AI trained before November 2025 will not include these. Confirm ACCC Register status: for any franchisor client, check the Franchise Disclosure Register directly at the time of advice. AI cannot access the live Register and enforcement or compliance status may have changed since the AI's training cutoff. Cross-check restraint of trade and goodwill compensation provisions: for any post-1 April 2025 agreement, confirm AI has applied the new goodwill compensation requirement before any post-term restraint can be enforced, and that 'genuine compensation for goodwill' has been addressed in the agreement (recognising this is unsettled). Check UCT compliance: identify all terms that could constitute unfair contract terms under the ACL against the ACCC's 2025-26 enforcement priorities — do not rely solely on AI identification; cross-check against the ACCC's public UCT enforcement guidance. Check CCA competition law provisions: for any distribution or supply arrangement, confirm AI has correctly applied Australian RPM (per se prohibited, s 48), third-line forcing (SLC test, post-2017), and cartel conduct rules — reject any US or EU analysis that may have contaminated the AI output. Verify confidentiality compliance and data handling: confirm no client-confidential information (FDD contents, financial data, dispute particulars, franchisee identities) was input into a public AI tool. If AI was used via a compliant, data-isolated platform, document the tool name, version and data-handling controls for audit purposes.

- Verify the Code version: confirm whether the 2014 Code or the 2025 Code applies, and if the 2025 Code, whether the April 2025 tranche only or also the November 2025 tranche applies. AI citing the wrong Code version is a critical error — check by agreement date, transfer, renewal or extension date.
- Check all penalty figures: verify the current Commonwealth penalty unit value against s 4AA Crimes Act 1914 (Cth) (was $330 from 7 November 2024; indexed on 1 July 2026) and confirm the number of penalty units cited by AI matches the current Code provision.
- Verify all case citations independently: run every case name through Austlii or Jade before use. The disciplinary AI-citation precedent is Dayal [2024] FedCFamC2F 1166 — not Handa & Mallick [2024] FedCFamC2F 957, which is the underlying family law matter. Discard any citation AI cannot produce a verifiable neutral citation for. Check that the proposition attributed to the case is actually held in the judgment.
- Check s 43 and s 44 compliance for post-November 2025 agreements: confirm AI has identified and drafted compliant early termination compensation (s 43) and return on investment (s 44) clauses in any franchise agreement entered into, transferred, renewed or extended on or after 1 November 2025. AI trained before November 2025 will not include these.
- Confirm ACCC Register status: for any franchisor client, check the Franchise Disclosure Register directly at the time of advice. AI cannot access the live Register and enforcement or compliance status may have changed since the AI's training cutoff.
- Cross-check restraint of trade and goodwill compensation provisions: for any post-1 April 2025 agreement, confirm AI has applied the new goodwill compensation requirement before any post-term restraint can be enforced, and that 'genuine compensation for goodwill' has been addressed in the agreement (recognising this is unsettled).
- Check UCT compliance: identify all terms that could constitute unfair contract terms under the ACL against the ACCC's 2025-26 enforcement priorities — do not rely solely on AI identification; cross-check against the ACCC's public UCT enforcement guidance.
- Check CCA competition law provisions: for any distribution or supply arrangement, confirm AI has correctly applied Australian RPM (per se prohibited, s 48), third-line forcing (SLC test, post-2017), and cartel conduct rules — reject any US or EU analysis that may have contaminated the AI output.
- Verify confidentiality compliance and data handling: confirm no client-confidential information (FDD contents, financial data, dispute particulars, franchisee identities) was input into a public AI tool. If AI was used via a compliant, data-isolated platform, document the tool name, version and data-handling controls for audit purposes.

## Tasks (22)

| Task | Level | How AI is used | What the lawyer must review |
| --- | --- | --- | --- |
| [Draft or review a franchise disclosure document against the prescribed headings](https://ailawframework.com/practice/franchising-and-distribution/draft-or-review-a-franchise-disclosure-document-against-the-prescribed-h.md) | Red | The tool builds a register of the prescribed disclosure items under the Code edition the lawyer names and records against each item the source paper supplied… | The lawyer drafts every item and checks their own wording against the papers — each prescribed item answered in the franchisor's own terms, and fees, sites,… |
| [Check the franchisor's disclosure and any registration the jurisdiction requires](https://ailawframework.com/practice/franchising-and-distribution/check-the-franchisor-s-disclosure-and-any-registration-the-jurisdiction.md) | Yellow | Compare the disclosure document with any register or filing extract that exists, and list missing fields, overdue confirmations and mismatches. | Confirm whether a register or filing applies here, and who runs it Do not treat a generated field list as the current form |
| [Draft or review a franchise agreement from the disclosure and the term sheet](https://ailawframework.com/practice/franchising-and-distribution/draft-or-review-a-franchise-agreement-from-the-disclosure-and-the-term-s.md) | Yellow | Draft the territory, IP, operations, fee and reporting clauses to the lawyer's clause-by-clause instructions, working from the term sheet, the disclosure… | The lawyer settles every clause as their own: that it matches the term sheet and does not contradict the disclosure document, and that the franchising code's… |
| Build a franchisee due-diligence issues list from the disclosure pack | Red | Produce a checklist, a list of questions for the franchisor, and red flags (turnover, litigation, earnings claims) from the disclosure document. | Check the figures that matter independently: this advice drives a major investment Do not treat a summary as the disclosure |
| Map post-term restraints and goodwill claims from the agreement | Red | Extract cascading restraint clauses and any goodwill or exit-payment terms into a table by time, geography and activity. | Decide enforceability under the governing restraint law Do not treat a generated 'unenforceable' label as advice |
| [Check investment, earnings-claim and return disclosures in the pack](https://ailawframework.com/practice/franchising-and-distribution/check-investment-earnings-claim-and-return-disclosures-in-the-pack.md) | Red | Extract stated investment, working-capital and earnings figures from the disclosure and list the supporting documents, marking unsourced claims. | Treat earnings claims as high-risk Confirm the current disclosure rule, including any return-on-investment duty |
| [Check early-exit and end-of-term compensation clauses](https://ailawframework.com/practice/franchising-and-distribution/check-early-exit-and-end-of-term-compensation-clauses.md) | Red | Extract termination-for-convenience, non-renewal and compensation clauses from the agreement and line them up against the Code or rule the lawyer has named. | Confirm which franchise code or rule applies Check when the agreement was entered or last renewed, which decides the code |
| Draft a franchise dispute notice and a mediation position paper | Yellow | Produce a dispute notice, a chronology and a mediation paper from the agreement, the applicable dispute procedure and the correspondence file. | Confirm which franchise code or dispute rule applies Check cooling-off and mediation gates, which differ by date of agreement |
| Map termination and handback steps from the agreement and franchise rules | Yellow | List notice, cure, de-identification, stock and IP-handback steps with dates, and flag steps the papers do not cover. | Check which version of the franchise rules applies Confirm each procedural step: under some rules a mis-step voids the termination |
| Draft or review a distribution, dealer or agency agreement | Yellow | Produce a first draft from the precedent and flag exclusive, RPM, IP and termination terms, with a note if the arrangement may be a franchise. | Decide first whether the arrangement is a franchise Do not rely on a 'distributor' label to answer that question |
| Review marketing-fund statements against the disclosure and the franchise rules | Yellow | Extract fund contributions, expenditure and the annual statement into a reconciliation table, marking missing line items. | Confirm the current fund-disclosure rules Check any specific-purpose fund additions |
| [Map online-channel and territorial-overlap clauses](https://ailawframework.com/practice/franchising-and-distribution/map-online-channel-and-territorial-overlap-clauses.md) | Yellow | Extract e-commerce, marketplace and reserved-channel clauses from the agreement and operations manual into a conflict table. | Read online sales policies with the competition rules Check for resale-price or exclusive-dealing problems |
| Compare the disclosure document with the franchise agreement | Yellow | Line disclosure items up against the agreement clauses and list inconsistencies on fees, territory, restraints and term. | Read both the disclosure document and the agreement Treat any mismatch as a disclosure problem, even though the agreement usually wins at law |
| Extract fee, rebate and supplier-restriction terms into a money table | Green | Pull royalties, marketing levies, rebates and designated-supplier rules into a table with clause references. | Read the operations manual as well as the agreement Check rebate disclosure and supplier restrictions, where many disputes start |
| Summarise a franchise agreement and disclosure document | Green | Extract key terms and disclosure items. | Verify. |
| Check disclosure documents against the Franchising Code | Yellow | Flag missing code items. | Lawyer confirms. |
| Draft a franchisee termination notice | Red | Draft from facts. | Lawyer settles. |
| Compare franchise agreement versions | Green | Produce a redline summary. | Verify. |
| Draft a marketing-fund report review | Yellow | Analyse the report. | Lawyer reviews. |
| Advise on AI-generated franchise marketing copyright | Yellow | Analyse. | Lawyer advises. |
| Apply ethical AI rules in franchise disputes | Green | Check. | Lawyer confirms. |
| Summarise franchise network AI tool licences | Green | Summarise. | Verify. |

## Jurisdiction notes

### Australia

#### Franchising Code

Franchising Code of Conduct 2025, made under the Competition and Consumer Act 2010 (Cth): in force 1 April 2025, with further provisions from 1 November 2025. The ACL and state contract law also apply.

#### Distribution

CCA exclusive dealing (s 47); third-line forcing needs a substantial lessening of competition (since 2017); resale price maintenance (s 48) is per se prohibited; cartel provisions apply.

#### Disclosure and Register

Disclosure documents follow a prescribed model. The ACCC runs the Franchise Disclosure Register and issued infringement notices of $15,650 to $19,800 in 2024–25.

#### New obligations

The 2025 Code added goodwill compensation, early termination compensation (s 43) and return on investment (s 44), commencing 1 November 2025.

- Reject any output that applies the superseded 2014 Code.
- Check every date, section and penalty amount against the current Code before advice goes out.

### New Zealand

Local name: Franchising (Fair Trading Act 1986; no franchise-specific statute)

#### No franchise statute

No franchise-specific Act or mandatory code on official sources. A 26 June 2009 Beehive speech found no case for franchise-specific regulation.

#### What applies

Fair Trading Act 1986: misleading or deceptive conduct, unfair practices and false claims. Contract, IP and competition law also apply.

#### Unconscionable conduct

The Commerce Commission explains the s 8 factors, applies the prohibition to business-to-business contracts, and uses franchise examples.

#### Not Australian law

No Franchising Code, Franchise Disclosure Register or statutory disclosure document. A Franchise Association code does not replace the Fair Trading Act.

- Do not file a generated citation, quote or statutory reference until you have opened it in legislation.govt.nz or a trusted case database.
- Do not enter private, confidential, suppressed or privileged material into a public chatbot.

Sources:

- [Beehive: Where Franchising Fits in New Zealand's Regulatory Framework (26 June 2009)](https://www.beehive.govt.nz/speech/where-franchising-fits-new-zealand%E2%80%99s-regulatory-framework) (checked 2026-09-23)
- [Fair Trading Act 1986](https://www.legislation.govt.nz/act/public/1986/121/en/latest/) (checked 2026-09-23)
- [Commerce Commission: unconscionable conduct](https://www.comcom.govt.nz/business/your-rights-as-a-business/unconscionable-conduct/) (checked 2026-09-23)
- [Consumer Protection NZ: Fair Trading Act](https://www.consumerprotection.govt.nz/general-help/consumer-laws/fair-trading-act) (checked 2026-09-23)
- [Courts of New Zealand: GenAI guidelines — Lawyers (7 December 2023)](https://www.courtsofnz.govt.nz/assets/6-Going-to-Court/practice-directions/practice-guidelines/all-benches/20231207-GenAI-Guidelines-Lawyers.pdf) (checked 2026-09-23)

### United States

Local name: Franchising and distribution

#### Governing law

The FTC Franchise Rule plus state franchise-registration and relationship statutes. Distribution and dealer statutes are state law.

#### Checking

Check generated FDD mark-ups against the current FTC rule and the state examiner's requirements.

Sources:

- [ABA Formal Opinion 512, Generative Artificial Intelligence Tools (29 July 2024)](https://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/ethics-opinions/aba-formal-opinion-512.pdf) (checked 2026-09-23)
- [FTC: Franchise Rule](https://www.ftc.gov/legal-library/browse/rules/franchise-rule) (checked 2026-09-23)
- [16 CFR Part 436: disclosure requirements and prohibitions concerning franchising](https://www.ecfr.gov/current/title-16/chapter-I/subchapter-D/part-436) (checked 2026-09-23)

*Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*