Highly rated Davies has failed to make an appearance for Victory this season, while Franjic has also been allowed to depart
UPDATE: It has been a big day for squad changes at Melbourne Victory, with Julius Davies and Petar Franjic released from their contracts.
Davies has already found a new club, snapped up by Brisbane Roar.
Roar confirmed the signing of talented youngster Davies on Wednesday within hours of him leaving Victory, with 18-year-old attacking midfielder signing a deal that will keep him with the Roar until the end of the 2014-2015 season.
Davies had been with the Victory since the start of 2012, but had only managed two appearances at the club and none this season.
Davies, who moved to Perth from Sierra Leone as an 11-year-old and spent time on the books of both Bayern Munich and Hoffenheim as a youth, said he had enjoyed his 12-month stint in Melbourne.
"It was a great experience and I am really glad I had the opportunity with Melbourne Victory even though it did not work out as I had hoped," Davies said.
"I want to thank all my team-mates who have been great to me during my time here in Melbourne. I also wish to thank everyone at the Melbourne Victory Football Club for their support and I look forward to the next challenge in my career."
Victory also announced on Wednesday that they have also released defender Franjic from his current contract.
The 20-year-old made 31 senior appearances for the club since debuting in 2010.
"Petar is a terrific clubman but, unfortunately for him, competition is strong within the squad and he decided that it would be best for his development to seek regular first team opportunities elsewhere," Postecoglou told the Victory website.
"We wish Petar all the best for the future."
Franjic, who has represented Australia at junior levels, said on the website: "I'd like to thank the club, the players and the fans for making my time at Melbourne Victory extremely enjoyable."
"As a young player though, I want to be playing regularly and for that reason I've chosen to explore other options," Franjic added.
And in more transfer news, former Brisbane youngster Rocky Visconte has been signed by Western Sydney Wanderers.