HOCW’s Franchise Series – Franchise Disclosure Register - Franchisors it's time to register

HOCW’s Franchise Series continues with an article on the Franchise Disclosure Register where we outline what it is, key deadlines, why it was created, who needs to register and ongoing obligations and requirements.

What is the Franchise Disclosure Register?

The Franchise Disclosure Register (Register) is a free online tool, mandated by the Franchising Code of Conduct (Code). The Register contains information about franchisors to assist prospective franchisees make informed decisions before entering into a franchise agreement. The Code was amended on 1 April 2022 by the Competition and Consumer (Industry Codes – Franchising) Amendment (Franchise Disclosure Register) Regulations 2022 to deal with the framework of the Register. Click here to read the Regulations.

Key deadlines

By 14 November 2022 franchisors who are required to register need to create their profile and upload key disclosure information about their franchise. This can be done by creating a Digital Identity and creating your profile here: https://franchisedisclosure.gov.au/.

From 15 November 2022 members of the public will be able to access the online Register and find out information, about registered franchisors, that is valuable to know when making business decisions. 

Why has the Franchise Disclosure Register been created?

The Register has been created in response to the Fairness in Franchising report, tabled by the Parliamentary Joint Committee on Corporations and Financial Services in March 2019. That report found that there is an asymmetry of resources, business experience, education and sophistication that exists between franchisees and franchisors. 

The Register is part of a suite of franchising reforms that aim to improve the power imbalance that currently exists in the sector. 

What franchisors need to do

Franchisors operating in Australia should check to see if they are required to register. 

Unless you are a master franchisor, with only one sub-franchisee, and you do not intend on issuing franchises in Australia, then you currently have obligations, both initial and ongoing, that you must fulfill in relation to the Register.

Initial obligations for franchisors

Initial obligation to provide information for inclusion in the Register— franchisors that have given a disclosure document on or before 31 October 2022

• Under clause 53C of the Code, if you have provided a disclosure document to a prospective franchisee on or before 31 October 2022, then by 14 November 2022 you must create a profile on the Register.

Initial obligation to provide information for inclusion in the Register— other franchisors

• Under clause 53D of the Code, franchisors that issue their first disclosure document on or after 1 November 2022, must create a profile on the Register at least 14 days before they enter into a franchise agreement with a prospective franchisee.

Failing to do so puts you at risk of incurring a maximum penalty of $133,200.00.

Minimum required information franchisors must provide in the Register

If you are a franchisor to which either clause 53C or 53D apply, the minimum information you must provide for inclusion in the Register is:

• the name of the franchisor entity
• 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
• the ANZSIC division and subdivision codes for the industry in which the business of the franchise operates.

The Secretary may require that you provide additional information from the disclosure document provided it is not personal information that relates to an individual other than the franchisor or information that relates to a particular franchisee or a particular site occupied by a franchisee.

Voluntary information

Currently, the Register allows franchisors to disclose a variety of information in addition to the Minimum Required Information (see above).  Such additional information includes information from the franchisor’s Key Fact Sheet, Standard Form Franchise Agreement and Disclosure Document. Those documents may also be uploaded to the Register. Be aware, that providing additional information, including the documentation above, places that information in the public domain.

Should you choose to provide any of the abovementioned documents or a link to a website that contains those documents, you:

• must redact personal information that relates to an individual other than the franchisor; and information that relates to a particular franchisee or particular site being occupied by a franchisee
• may redact from the document information that is of a commercial nature and is commercially sensitive, (again, bear in mind that a competing franchisor will be able to access the Register).

It has been foreshadowed that regulatory changes will be implemented to make the following information mandatory in mid-November:

• How long has the franchisor operated the franchise or franchise system in Australia?
• The number of franchisees in the system (including franchisor operated businesses)
• Which states/territories the franchisor currently operates in
• Does the franchise system restrict franchisees choosing suppliers?
• Information about payments and costs
• Does the franchisor’s standard form franchise agreement allow the franchisor to vary the agreement without franchisee’s consent?
• What is the standard term of a franchise agreement?
• Are franchisees given the option to renew a franchise agreement?
• Are franchisees entitled to compensation for goodwill in the business?
• Are franchisees subject to a restraint of trade (or similar) clause?

Franchisors may voluntarily provide the additional disclosure information now, however they can also choose to wait and provide this information once it becomes mandatory to do so. Administrators of the Register will contact all registered franchisors when the requirement to provide additional disclosure information becomes mandatory.

As could be expected, the information provided by a franchisor in response to any questions on the Register, must be reflected in and consistent with the information contained in that franchisor’s Disclosure Document, Key Facts Sheet and Standard Form Franchise Agreement.

Ongoing obligation to annually update or confirm information included in the Register

If you are required to register, then on an annual basis, by the 14th day of the 5th month after the end of the financial year, you must do the following:

• confirm that the information on the Register is current and correct; and
• to the extent the information is incorrect, out of date, or has not been previously included in the Register, update or provide the information
• if you are a franchisor that has a 30 June end of financial year, the confirmation and/or updates must be made by 14 November each year
• if you are a franchisor that has a 31 December end of financial year, you must confirm and/or update the Register by 14 May each year.

Failing to do so puts you at risk of incurring a maximum penalty of $133,200.00.

Next steps franchisors need to take

Get moving, but make sure you do not rush the process. The Register is quite a simple concept; the registration process however is arguably much more complex.

The link to create your profile is here: https://franchisedisclosure.gov.au/

Should you require assistance with creating your profile please do not hesitate to contact Vincent Caruso - Commercial Law on 03 9550 4600. We are here to help.