It happens slowly. A dealer programme starts as a simple distributor arrangement — the dealer buys product wholesale and resells. Then the brand asks dealers to use brand signage. Then to train staff in a particular way. Then to follow customer-service protocols. Five years in, the "dealer agreement" looks a lot like a franchise.
Under the Australian Franchising Code of Conduct, that's enough. The Code defines a franchise functionally, not by the label on the document. If a dealer is operating under a system substantially controlled by the brand, with payment of a fee (including margin built into wholesale pricing), it's a franchise — Disclosure Document, cooling-off, and all.
Why this matters
Operating a franchise network without Code compliance is the kind of mistake that surfaces at the worst possible moment: a dealer dispute, an ACCC inquiry, a transaction-stage diligence. The remedy at that point is much more expensive than the conversion would have been.
The conversion path
1. Diagnostic
We map the existing dealer relationship against the Code's franchise definition: written agreement, system control, fee. Where the existing arrangement falls short of Code compliance, we identify the gaps.
2. Restructure decision
Two options: (a) restructure the dealer agreement to remove the system control — pull back, become a true distributor; (b) embrace the franchise designation and build out compliant documentation.
Option (a) is rarely viable once a brand has invested in dealer training, signage and customer experience standards. Option (b) is usually the practical answer.
3. Conversion programme
For each existing dealer, the conversion includes:
- Disclosure Document (provided 14 days before the new agreement is signed)
- Information Statement
- New Franchise Agreement to replace the existing dealer contract
- Grandfathering provisions where appropriate (rights accrued under the old arrangement)
- Communication strategy — these conversations require care
4. New-dealer pathway
Going forward, all new operators sign under the franchise structure from day one. The "dealer" category disappears.
The timeline
For a network of 10–30 dealers, expect a 4–6 month conversion. The drafting is fast; the existing-dealer conversations are what take time.
The conversation with existing dealers
This is where most conversions stumble. Existing dealers will (rightly) want to understand: do their accrued rights survive? Do fees change? Is their territory protected? Get the answers right before the first Disclosure Document goes out — not during the cooling-off period.
Where ABC fits
We've led dealer-to-franchise conversions where the alternative was a regulator inquiry. Senior partners only, by invitation. If you suspect your existing programme is on the wrong side of the Code, reach out for a confidential conversation.