A new online Franchise Disclosure Register – what does this mean for franchisors?

Franchising laws have changed, yet again! This time, with the introduction of the online Franchise Disclosure Register (Register).

The Register will be a welcome introduction for prospective franchisees, who will soon have a more accessible means for obtaining information relevant to their decision to enter into a franchise agreement.

Franchisors on the other hand should be aware of the new disclosure obligations it imposes, which operate in addition to the pre-existing disclosure obligations under the Franchising Code of Conduct (Code). As the deadline for compliance by franchisors is fast-approaching, it is a fitting time for franchisors to check to see whether they will be ready to comply with these new disclosure obligations.

The Register

The Register will function as a database of franchisors’ disclosed information which can be accessed for free by any member of the public.

Previously, franchisors disclosed information via disclosure documents which were only made available to prospective franchisees or when requested by existing franchisees at certain times. The Register in effect places greater onus on franchisors to make certain information public, thereby increasing transparency and accountability in the franchise sector.

The Register can be accessed at https://franchisedisclosure.gov.au/, but will only go live on 15 November 2022.

Disclosure requirement

While the Federal Government is responsible for operating the Register, it will not vet or check the information uploaded to the Register. Franchisors will be responsible for the accuracy of the information they disclose on the Register.

Franchisors must provide, as a minimum, their name, trading name, ABN, office address, phone number, contact email and ANZSIC division and subdivision codes for the industry in which the franchise operates (required information). If provided by the franchisor, the Register may contain a franchisor’s disclosure document, key facts sheet, and standard form agreement.

An individual’s personal information (other than the franchisor’s personal information) or information relating to a particular franchisee, contained within these documents, must be redacted by the franchisor. Franchisors may also choose to redact commercially sensitive information within these documents.

The Register may also contain other information provided by a franchisor that relates to their franchise system, or is relevant to prospective or existing franchisees, so long as it is not personal information relating to an individual (other than the franchisor) or information relating to a particular franchisee.

The Register is presently able to receive information uploaded by a franchisor. Uploading information will require a franchisor (or more likely, a nominated delegate/contact such as a solicitor) to create a franchise profile using their MyGov ID, before providing the required information.

The deadline for uploading the required information is 14 November 2022.  After that time, for any new franchise agreement that a franchisor proposes to enter into, the required information must be provided at least 14 days before entering into the agreement.

Obligation to update annually

Franchisors will be required to confirm the currency of uploaded information, or correct out-of-date information, once a year by the 14th day of the fifth month following the end of the financial year (that is, within two weeks after the franchisor updates their disclosure document each year).

Penalties

Failure to provide required information, or ensure it is up-to-date, will be a breach of the Code and can attract a civil penalty of up to 600 penalty units (equivalent to $133,200).

Next steps

While the deadline is still months away, franchisors should consider the information they will be required to upload to the Register as this information will be made available for public inspection.

Moreover, depending on the type of information disclosed, franchisors will have a requirement or discretion to redact. In light of the fact that the Register is a new concept and rollout for franchising in Australia, and the consequent likelihood of teething issues arising, franchisors should prepare the required information as early as possible.

If you have any questions about how the introduction of the Register affects your unique circumstances, please contact a member of Thomson Geer’s Intellectual Property Team.