As of 14 November 2022, franchisors will be required to upload information to the publicly accessible Franchise Disclosure Register (“the Register”). This article will provide some background to these changes as well as a guide for how franchisors can ensure they are complying with their new disclosure obligations.
Why have these changes been introduced?
The Franchise Disclosure Register aims to promote transparency by making information regarding franchises easily accessible to prospective franchise buyers, current franchisees and professional advisers. While the information uploaded to the Register is already made available to prospective franchisees under the Franchising Code of Conduct, franchisors should be aware that the introduction of the Register means that they have significant ongoing disclosure requirements.
What do franchisors need to upload to the Franchise Disclosure Register?
Franchisors are required to upload a range of specific information to the Register, as well as any information requested by the Secretary of the Department that is required to be included in a Disclosure Document but does not include personal information. The kind of information that franchisors will need to upload includes:
- The name of the franchisor;
- The name under which the franchisor carries on business in Australia relevant to the franchise;
- If the franchisor has an ABN—the franchisor’s ABN;
- The address, or addresses, of the franchisor’s registered office and principal place of business in Australia;
- The business telephone number and email address of the franchisor;
- How long has the franchisor operated the franchise or franchise system in Australia;
- Which States and Territories the franchisor currently operate in;
- Does the franchise system restrict franchisees from choosing suppliers;
- Information about payments and costs;
- Does the franchisor’s standard form of franchise agreement allow the franchisor to vary the agreement without the franchisees’ consent;
- Are franchisees entitled to compensation for goodwill in the business;
- Are franchisees subject to a restraint of trade (or similar) clause;
- The ANZSIC division and subdivision codes for the industry in which the business operated under the franchise operates; and
- Other information requested by the Secretary of the Department that is required to be included in a Disclosure Document.
In practice, franchisors may choose to upload a copy of their Key Facts Sheet or Disclosure Document with certain information redacted, along with any other additional information required to be disclosed. Alternatively, franchisors may choose to prepare their own form or document which sets out all the information that is required to be disclosed on the register.
What information can franchisors redact?
The following information must be redacted before documents are uploaded to the Register:
- personal information that relates to an individual other than the franchisor; and
- information that relates to a particular franchisee or a particular site being occupied by a franchisee.
Franchisors may also redact information that is of a commercial nature and is commercially sensitive.
When do franchisors need to update their information?
Moving forward, franchisors must update their information annually by providing their information to the Register in the approved form on or before the 14th day of the 5th month of the new financial year. This means that most franchisees will need to update their details with the Register by 14 November each year.
What happens if franchisors don’t upload information to the Franchise Disclosure Register?
Failing to upload information to the Franchise Disclosure Register or ensuring it is updated annually can attract a penalty of 600 penalty units, meaning that franchisors could be liable for a penalty of up to $133,200 for failing to comply.
For more information, reach out to the Franchising Team at Rouse Lawyers today
Disclaimer
The information contained on this website is for general guidance on matters of interest only. The application and impact of laws can vary widely based on the specific facts involved.
Accordingly, the information on this site is provided with the understanding that the authors and publishers are not providing legal advice. As such, it should not be used as a substitute for consultation with professional legal advisers. Before making any decision or taking any action, you should consult with a professional lawyer from Rouse Lawyers.
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