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 (‘Regulations’) to insert a new clause 53. Clauses 53A to 53J deal with the framework of the Franchise Disclosure Register (the ‘Register’) and impose obligations on franchisors operating in Australia to create a profile on the Register. In addition, it provides for the voluntary disclosure of Disclosure Documents, Franchise Agreements and Key Facts Sheets (‘Disclosure Material’), and sets out the requirements for redacting certain information from such Disclosure Material. For a copy of the Regulations, click here.
1. Key deadlines
The Regulations commenced on 1 April 2022, just one day after being registered.
By 14 November 2022, Franchisors must create a profile on the Franchise Disclosure Registry via the myGovID website. This can be done any time from now – see the link below.
On 15 November 2022, the Register will become live and all published franchisors’ profiles and Disclosure Material will be able to be searched by members of the public on the internet, for free.
2. Who must register?
All franchisors operating in Australia should check if they are required to register.
Clauses 53C and 53D of the Code make it clear that all franchisors who:
- have created a disclosure document pursuant to clause 8 of the Code and have given that disclosure document 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 they are a master franchisor, the master franchise system has two or more sub franchisors;
they are required to register.
This means that master franchisors who have only appointed one sub franchisor in Australia, are not required to register. It is not limited to Australian franchisors. So international franchisors who directly franchise in Australia or who have more than one sub franchisor in Australia are also required to register.
3. What information must be disclosed?
The information that must be disclosed is set out in clauses 53C(2)(a)-(g) and 53D(2)(a)-(g) of the Code and includes, the franchisor’s name, ABN, registered address and principal place of business, business phone number and email address and the name under which the franchisor carries on business in Australia relevant to the franchise.
In addition, the ANZSIC division and subdivision codes for the industry in which the business of the franchise operates must be disclosed. This is a new requirement under the Code which means franchisors need to ascertain which ANZSIC divisions and subdivision codes apply to their business.
The information must be provided in the form and manner approved by the Secretary before 14 November 2022. Where a franchisor first creates and gives a disclosure document after 31 October 2022, the information must be given at least 14 days before the franchisor enters into a franchisor agreement with a prospective franchisee.
In addition, clauses 53C(4) and 53D(4) allow for the Secretary to require the franchisor to 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.
4. What about updating the information on the Register?
At least once each financial year, by the 14 day of the fifth month after the end of the financial year, franchisors who are required to register must either:
- confirm that the information on the Register is current and correct; and/or
- to the extent the information is incorrect, out of date, or has not been previously included in the Register, update or provide the information.
For franchisors who have a 30 June end of financial year, updates must be made by 14 November each year. For those that have a 31 December end of financial year, updates must be made by 14 May each year.
5. What additional information may be disclosed (and what must be redacted)?
The Register may contain other information provided by a franchisor if it relates to the franchise system or is relevant to prospective or existing franchisees, provided it is not personal information about an individual other than the franchisor or information that relates to a particular franchisee or site.
The Register may only contain a franchisor’s disclosure document and key facts sheet created and maintained under the Code, and the franchisor’s standard form of franchise agreement.
Franchisors may provide their disclosure document, key facts sheet and standard form franchise agreement by uploading directly onto the Register or by providing a link to a website that publishes those documents.
Before providing the documents or the link, franchisors must redact the following:
- 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.
Franchisors may also redact information that is of a commercial nature or is commercially sensitive.
The Regulations create three new penalty provisions. Civil penalties of 600 penalty units apply for failing disclose the required information pursuant to clauses 53C(2) or 53D(2) and failing to update pursuant to clause 53E(2). Currently this equates to $133,200 per act of non-compliance.
7. What else is new?
The Regulations also appear to fill a couple of potential gaps in the Code, by inserting new clauses 9(1A)(b) and (c) to ensure that franchisors must provide disclosure documents and key facts sheets that are created in the financial year in which they are given, not just those that have been updated in the financial year.
8. Role of Minister and Secretary
The Register is administered by the Minister who administers the Australian Small Business and Family Enterprise Ombudsman Act 2015. The Secretary of the relevant Department is responsible for establishing the Register and has powers under the Code to correct clerical errors and remove, update and replace certain information and documents.
9. Review of these Code changes
In an unusual step, the Regulations provide that a review into the operation of the Franchise Disclosure Register must commence on or after 15 November 2023 with a written report to be provided to the Minister by 30 June 2024. The review must include an opportunity for franchise industry stakeholders to make written submissions on the operation of this part of the Code.
10. Next steps?
We understand the registration process will require a contact person or a delegate for the franchisor to be nominated. It is also not known whether franchisors’ directors will be required to provide their Director’s ID. Franchisors should give careful consideration to who their contact/delegate should be as they will be responsible for registering and updating the register, on time, each year.
To register, franchisors must create a franchise profile using their myGovID. For a link to the Franchise Disclosure Register and get started creating your profile, click here.
With anything new there can be teething issues, so we recommend franchisors commence preparing their franchise profile as soon as possible. Any franchisors considering uploading their disclosure document, franchise agreement or key facts sheet should obtain legal advice about what might need to be redacted. Anyone who has any queries or would like assistance is encouraged to contact the HWL Ebsworth Franchising Team.
This article was written by Louise Wolf, Special Counsel and reviewed by Sean O’Donnell, Partner.