On 1 April 2022, the Franchising Code of Conduct (Code) was amended by the Competition and Consumer (Industry Codes – Franchising) Amendment (Franchise Disclosure Register) Regulations 2022 (Cth) (Regulations).
The Regulations have the effect of adding a new framework to the Code, being the Franchise Disclosure Register (Register).
As a result, most franchisors will need to create a profile on the Register on which they must mandatorily disclose particular disclosure information by the deadline of 14 November 2022.
On 15 November 2022, the Register will become live and all published franchisor’s profiles and disclosure information will be able to be accessed by members of the public, free of charge.
Registration can be done at any time between now and the deadline at https://franchisedisclosure.gov.au/.
Which franchisors need to be registered?
Clauses 53C and 53D of the Code provide that the following franchisors must be registered on the Register:
- Franchisors who either:
- have created a disclosure document pursuant to clause 8 of the Code and have given that document to a franchisee on or before 31 October 2022 pursuant to clause 9; or
- are proposing to enter into a franchise agreement with a prospective franchisee and are required to give a disclosure document to the prospective franchisee pursuant to clause 9.
- If it is a master franchisor whose master franchise system has two (2) or more sub-franchisors.
This definition encompasses most franchisors in Australia. Master franchisors who have only appointed one sub franchisor are not required to register.
Where a franchisor first creates and gives a disclosure document after 31 October 2022, the information must be given at least fourteen (14) days before the franchisor enters into a franchise agreement with a franchisee.
What information must be disclosed?
The following information must be disclosed on the Register:
- The name of the franchisor, their business and registered business name.
- The franchisor’s ABN.
- The franchisor’s registered office and principal place of business.
- The franchisor’s contact details.
- The ANZSIC division and subdivision codes for the industry in which the business of the franchise operates.
In addition to the above, some further information may also be provided on the Register voluntarily by a franchisor. This information is as follows (collectively the Disclosure Documents):
- A franchisor’s Disclosure Statement.
- A franchisor’s Key Facts Sheet.
- The standard form franchise agreement used by the franchisor.
If the franchisor chooses to include the Disclosure Documents on the Register, it must redact the following information to the extent that they appear in the Disclosure Documents:
- Personal information that relates to an individual other than the franchisor.
- Commercially sensitive information.
- Information that relates to a particular franchisee or a particular site being occupied by a franchisee.
Updating the requisite information
The disclosed information must be updated by the franchisor at least once every year and the franchisor must confirm that the information is current and correct.
Purpose of the Register
The Register aims to increase transparency and access to disclosure information and to improve the reputation of the franchising industry and encourage high quality disclosure practices. This will assist potential franchisees with the key information they need to make a decision before entering into a franchise agreement.
Repercussions for non-compliance
The Regulations impose severe penalties for non-compliance with this new framework. 600 penalty units apply for:
- failing to disclose the required information; and
- failing to update the information each year.
This currently equates to $133,200.00 per act of non-compliance.
What should franchisors do next?
If you are a franchisor, you will need to:
- create a franchise profile on the Register by the 14 November 2022 deadline;
- publish the disclosure information about your franchise; and
- maintain a presence on the Register.
If you would like advice or assistance in relation franchising matters or commercial law generally, please contact our Senior Associate, Josef Ferraro on firstname.lastname@example.org or our accredited business law specialists and Partners Justin Thornton on email@example.com and Rahul Lachman on firstname.lastname@example.org or otherwise by calling them on (02) 4626 5077.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.