Following the Federal Government’s announcement of the Franchise Disclosure Register through the 2021 Exposure Draft legislation, the Competition and Consumer (Industry Codes – Franchising) Amendment (Franchise Disclosure Register) Regulations 2022 (the “Regulations“) came into effect on 1 April 2022.
The Regulations amend the Franchising Code of Conduct (the “Code“) by imposing obligations on franchisors to create a profile on the Franchise Disclosure Register (the “Register“). Additionally, and in what is a substantial reduction from what was contemplated in the initial Exposure Draft legislation, the Regulations provide for the voluntary disclosure of Disclosure Documents, Franchise Agreements and Key Facts Sheets.
What is the Franchise Disclosure Register?
The Register will be an electronic register where franchisors will be obligated to upload information pertaining to their franchise business. All information published on the Register will be publicly accessible from 15 November 2022.
The Commonwealth Government will be responsible for establishing the Register and can correct clerical errors and remove or update certain information and documents uploaded by franchisors. Notwithstanding this, it will be the responsibility of franchisors to ensure the information they upload is accurate and up to date.
Who is required to register?
The following franchisors operating in Australia must register and create a profile on the Register by no later than 14 November 2022:
- Franchisors who have created a disclosure document under the Code and have given that disclosure document to a prospective franchisee on or before 31 October 2022; or
- Franchisors who are proposing to enter into a franchise agreement with a prospective franchisee, and are obligated under the Code to provide the prospective franchisee with a disclosure document; or
- Any master franchisor who has two or more sub franchisors.
What will franchisors be required to disclose?
Franchisors must upload the following information:
- the name under which the franchise system trades in Australia;
- the Australian Business Number of the franchisor;
- the registered address and principal place of business of the franchisor in Australia;
- the business’s telephone number and email address;
- the Australian and New Zealand Standard Industrial Classification in which the franchised business operates; and
- any additional information required by the Secretary specific to that franchisor.
While not obligated, franchisors may also upload their Disclosure Documents and Key Facts Sheets maintained as required by the Code, as well as their standard form of franchise agreement. However, franchisors should take care to redact any personal information, information regarding franchisees, and commercially sensitive information from these documents.
Ongoing franchisor obligations
It will be the franchisor’s duty to annually update the information available on the Register by the 14th day of the fifth month following the end of the franchisor’s financial year. This includes an obligation to confirm that the information on the Register is correct and up to date. Any information on the Register which is not confirmed to be up to date will be removed after 18 months from the date it was uploaded.
When must information be uploaded?
Franchisors expecting to issue disclosure documents on or prior to 31 October 2022 are expected to upload all required information by 14 November 2022. From 31 October 2022 onwards, franchisors will be expected to comply with these obligations at least 14 days before they enter into a franchise agreement with a prospective franchisee.
Franchisors who fail to comply with these obligations will be subject to a civil penalty up to $133,200.00.
The Franchise Disclosure Register aims to create greater transparency in the franchising sector, and to better facilitate prospective franchisees in conducting due diligence enquiries and making informed business decisions before entering a franchise agreement.
It is important that all franchisors are aware of these changes and are proactive in preparing to meet these new obligations come 14 November 2022. If you would like to discuss this article or any other obligations contained within the Code, please contact Clinch Long Woodbridge Lawyers.
Important Disclaimer: The content of this article is general in nature and for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.