Key points

• Franchisors had until 14 November 2022 to upload key disclosure information to the new Australian Franchise Disclosure Register.
• Franchisors in Australia who failed to update the new Franchise Disclosure Register by this date or who do not annually maintain updates may face a penalty (currently 600 penalty units which equates to AUD$666,000 for a corporation).
• The Register is public and enables certain franchise information to be searched (though personal information as well as some commercial or commercially sensitive information can be redacted in some cases).

Background

Recent changes to the Australian Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth) (Franchising Code) included provisions for a new Franchise Disclosure Register (Register).

The new public Register was introduced to enable prospective franchisees assess potential franchise opportunities as certain information is now publicly searchable on the Register. The Register represents new stringent obligations on franchisors to publicly disclose information about the franchise and their franchise agreements.

What’s changed

Franchisors now have an obligation to provide certain mandatory information for inclusion in the new Register, which is publicly available for viewing.

Franchisors had until 14 November 2022 to upload their key disclosure information to the Register.

When originally proposed, the draft laws had suggested that franchisors would need to disclose their commercially sensitive information. Fortunately, the laws enacted allow franchisors to redact more of that information in certain circumstances.

Of note is that temporary changes originally made to the Franchise Register online portal suddenly changed last week – introducing (with only a few days’ notice) new additional disclosure requirements. Although registration business details had already been mandatory to provide, on Thursday 10 November 2022, Deputy Secretary of the Department of Treasury made a determination under subclauses 53C(4) and 53D(4) of the Franchising Code of Conduct, mandating provision of additional information (Determination) by 14 November 2022.

The amendments to the Franchising Code which enacted the Register are scheduled to be next reviewed after 15 November 2023. Until then, there is a new compliance obligation for certain franchisors in Australia to meet.

Key deadlines

The Register is open now and franchisors had until 14 November 2022 to register and provide the initial disclosure information.

The Register is now live and published franchise profiles are searchable by franchise buyers and public users.

Which franchisors need to register and maintain/update the disclosure information?

Franchisors need to be listed on the Register if:

1. under section 8 of the Franchising Code they are required to maintain a disclosure document; and
2. they have provided a copy of their disclosure document to a franchisee or prospective franchisee on or before 31 October 2022; and
3. if the franchisor is a master franchisor, where the master franchise system has two or more subfranchisors.

If a franchisor does not issue a disclosure document until after 31 October 2022 (for example, an overseas franchisor entering the Australian market after 31 October 2022), that franchisor must be included on the Register at least 14 days before entering into a franchise agreement with a prospective franchisee.

Where a master franchisor has no more than one master franchisee, the master franchisor will not need to register. However, their master franchisee may still be required to do so if they meet certain criteria.

Registration process

To register and maintain the information, franchisors must:

1. have a myGovID to log in to the Register (this is a Australian government recognised digital identity);
2. link their myGovID to their Australian Business Number (ABN);
3. create and publish a profile for the franchise (the person creating the franchise profile will also need to be authorised to act on behalf of the franchisor’s ABN – a process that can be done via myGovID’s Relationship Authorisation Manager (RAM); and
4. provide contact details to allow the Australian Government’s administrative support staff to contact the franchisor regarding the Register; and
5. manage the franchise profile, provide and update the mandatory information (and any additional voluntary information).

Appointing a representative to update

Franchisors can authorise a representative (for example, Dentons) to access and update the Register on their behalf using myGovID’s RAM.

What needs to be disclosed on the Register?

• Certain mandatory information must be disclosed on the Register such as the franchisor’s name and the trading name under which the franchisor carries on business in Australia relevant to the franchise.
• Franchisors may voluntarily also include on the Register:
  • the disclosure document;
  • the Key Facts Sheet; and
  • their standard form franchise agreement.

No other documents may be uploaded.

Following the Determination the amount and type of information that franchisors must include expanded greatly including additional information such as:

1. why the franchisor requires any payment before a franchise agreement is entered into;
2. details of the costs payable by a franchisee to start operating the franchised business or payments payable by a franchisee to the franchisor, or its associate or payable to anyone else.

Redacting information

Franchisors may redact certain commercially sensitive information from any documents they voluntarily upload to the Register if a commercial nature and they may redact certain personal information. Clearly there will need to be some judgement exercised about what to redact and there are risks associated with getting this wrong. To date there is little guidance from the regulators on this topic.

Ongoing responsibilities to update

Franchisors will be required to either confirm or update their disclosure information on the Register whenever they are required to update their Disclosure Document under clause 8 of the Franchising Code.

Penalties for failing to disclose

Failure to provide the necessary disclosure information on the Register or failure to annually confirm or update information on the Register could incur a penalty of AUD$666,000 for a corporation.

Next steps

Franchisors should register (if they have not already) and provide the required information where they are caught by the new requirement.

We strongly recommend that franchisors seek legal assistance about the impact of the Register and how to comply with the mandatory disclosure requirements where it may be commercially sensitive, given the register information is publicly available.

If you require assistance with registering or updating the Register or complying with this new requirement, please contact our Australian Franchising team.