On 3 March 2022, we published an article on draft Commonwealth legislation for the development of a publicly accessible Franchise Disclosure Register for the inclusion of information by franchisors about their franchise systems (Register).
On 1 April 2022, the Franchising Code of Conduct was amended by the Competition and Consumer (Industry Codes—Franchising) Amendment (Franchise Disclosure Register) Regulations 2022 (Regulations). The Regulations inserted part 5A into the Franchising Code of Conduct, which established the Register. As part 5A contains the relevant obligations regarding the Register, failure to comply will amount to a contravention of the Franchising Code of Conduct.
On 15 November 2022, the Register will go live and will be freely accessible to everyone, including franchisees, prospective franchisees, and advisors. The official Government website for information on the Register is available at the URL franchisedisclosure.gov.au, and presumably the Register will go live at this URL.
This article provides a high-level summary of the Register and the obligations which franchisors are required to meet.
What information needs to be included and by when does it need to be included?
Franchisors who provide a disclosure document on or before 31 October 2022, are required to create a franchise profile and include the following information on the Register by 14 November 2022:
- name and key identifying information of the franchisor, such as ABN;
- the Australia and New Zealand Industry Standard Industrial Classification (ANZSIC) division and subdivision codes for the industry in which the business operated under the franchise operates; and
- other information specified by the Government which is not personal information, including information about payments and costs, as well as responses to the following questions/prompts:
- 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?
- does the franchisor’s standard form franchise agreement allow the franchisor to vary the agreement without franchisees’ consent?
- what is the standard term of franchise agreements?
- 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?
It is currently optional for franchisors to upload their standard form franchise agreement, disclosure document, and key facts sheet.
The process for including information on the Register and the issue for international franchisors
In order to provide the requisite information in the Register, Australian franchisors will need to go through the MyGov process. Generally, this includes obtaining a digital signature, setting up a corporate MyGov ID and linking the digital identity to the Relationship Authorisation Manager.
Franchisors can authorise a representative, such as a lawyer, to access the Register on their behalf. Representatives will need to be authorised to act on behalf of the franchisor’s ABN for interactions with the Department of the Treasury. Representatives will also need their own Digital Identity.
We note that there is currently no way for international franchisors without an Australian based director or executive to go through the MyGov process. We have been informed that this issue has been raised with the Department of the Treasury, and they are working on building a link on the website that will allow this group to register without the MyGov process. We are awaiting an update on this issue.
Exemptions
Master franchisors are exempt from having a profile on the Register if they only have one Australian sub-franchisor, and no intention to grant further franchises.
For franchisors exempted from updating disclosure documents under Clause 8(7) of the Franchising Code of Conduct, they must still maintain a presence on, and update their Register profile each year. Franchisors are not required to publish updated disclosure information while this exemption stands.
Risk of including false, misleading or deceptive representations in the Register
It is important for franchisors to note that disclosures in the Register are made to the world at large, and so there is great potential risk associated with the disclosures made – a whole range of aggrieved persons can potentially sue on the basis of the representations made on the Register. Of course, only those persons with standing could sue, e.g. someone who can show that they would likely suffer loss if they relied on the statements, or a regulator such as the ACCC.
Concluding remarks
The introduction of the Register is the latest in a series of significant reforms to the regulation of the franchising sector in Australia. Franchisors must stay aware of their disclosure obligations under the Register and ensure that they comply.
Franchisors should closely check the information they present in the Register. It is advisable to err on the side of caution when presenting information.
Our Sydney team is available to assist with any questions you may have in relation to the Register.
For further information, please contact:
Rohit Dighe, Bird & Bird
rohit.dighe@twobirds.com
