Termination of a Franchise Agreement can occur in two circumstances in accordance with the Franchising Code of Conduct; when there has been a breach of the Franchise Agreement by the franchisee, or when there has been no breach (i.e. both parties agree to terminate).

When a franchisee has breached a franchise agreement the franchisor must still comply with the Franchising Code of Conduct in order to legally terminate the franchise. Section 21 requires a franchisor to give reasonable notice to the franchisee that they propose to terminate the Agreement because of a breach.

The franchisor must also tell the franchisee how to remedy the breach and give them reasonable time to remedy the breach. 30 days is generally considered to be a reasonable amount of time to remedy a breach. If the franchisee resolves the breach within the specified time then the franchisor cannot terminate the franchise. If the franchisee does not remedy the breach, then the franchisor is generally legally entitled to terminate. The franchisor however also has the right to terminate a franchise agreement immediately upon notice when one of the following events occurs:

* a Franchisee no longer has a licence to carry on the business;

* the Franchisee becomes bankrupt or insolvent;

* the franchise is abandoned;

* a Franchisee is convicted of a serious criminal offence;

* the franchise is operated in a way which endangers public health or safety;

* the Franchisee is fraudulent in connection with the franchise;

* the Franchisee consents to the termination.

The franchisor in the above cases does not need to offer the franchisee time to remedy the breach in order to terminate the franchise. This can be done immediately upon any one of the above events occurring.

The Franchising Code of Conduct also deals with dispute resolution procedures. It simply requires parties to refer any franchise dispute to mediation before it may proceed to the courts for resolution. Both the franchisor or franchisee may initiate mediation for any dispute arising between the franchisor and franchisee and the Code provides a step by step guide in complying with this procedure.

Once the mediation process has been invoked all parties must attend. From experience mediation is a successful way to resolve disputes and avoid the unnecessary delays and costs generally incurred in pursuing a matter in the courts. Surveys have revealed that in excess of 80% of disputes in Australia are resolved by mediation.