Last chance to register
5 min read
Most franchisors in Australia are required to have registered on the new Franchise Disclosure Register (Register) by Monday 14 November 2022, before it’s made public on 15 November 2022.
We briefly summarise the obligations that franchisors must meet before the Register goes live on Tuesday 15 November 2022.
How does this affect me?
- The Register will make information submitted by franchisors about their franchise systems freely accessible to the public. Franchisees, prospective franchisees and advisors will be able to find this information by searching the register.
- Failure to comply with the obligation to register and provide information will amount to a contravention of the Code.
- The Australian Government’s website for the Register can be found at https://franchisedisclosure.gov.au/.
- Beyond some basic information, disclosing most of the information requested by the register system is currently voluntary. However, it is anticipated that these will become mandatory in the near future, once the Register goes public.
Who in your organisation needs to know about this?
Franchising and legal compliance teams.
Who, when and how?
The Register was established under Part 5A of the Franchising Code of Conduct (Code), which was inserted into the Code in April 2022 by the Competition and Consumer (Industry Codes—Franchising) Amendment (Franchise Disclosure Register) Regulations 2022. As Part 5A of the Code contains the relevant obligations on franchisors regarding the Register, failure to comply will amount to a contravention of the Code.
Master franchisors with only one sub-franchisor in Australia (and who have no intention of granting any further master franchises in Australia) are exempt from this requirement. All other franchisors who have provided a disclosure document to a franchisee on or before 31 October 2022 must create a franchise profile and include the mandatory information on the Register by 14 November 2022.
To register and provide the requisite information, franchisors will need to take a few steps.
- Franchisors will need to have a Digital Identity, such as a corporate myGovID.
- Typically, to obtain the corporate myGovID, you will first need to obtain a digital signature, then set up a myGovID account.
- The myGovID will need to be linked to the franchisor’s Australian Business Number (ABN) in Relationship Authorisation Manager. Relationship Authorisation Manager is an authorisation service that allows a person to access government online services on behalf of a business.
- Franchisors can authorise representatives, such as lawyers, 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.
The government website does not provide a way for international franchisors without an ABN, or an Australian based director or executive, to proceed with the myGovID pathway for registration. Organisations without an ABN can email email@example.com for options for creating a profile.
Currently, franchisors are required to include the following basic information on the Register:
- Name, business or trading name and ABN of the franchisor.
- Business email address and contact phone number of the franchisor.
- Address(es) of the franchisor’s registered office and principal place of business in Australia.
- 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.
Although the Code does not specify this, the government also requires franchisors to specify the financial year on which the franchisor operates.
What information can I disclose on a voluntary basis?
The Register portal includes questions relating to a range of additional information, which are currently voluntary to provide. These questions include:
- 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 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?
These questions are currently voluntary because they have not been made mandatory under the Code. This is intended to be temporary: it is expected that, shortly after the Register becomes public on 15 November, the provision of this information will become mandatory. Regulatory changes have been made with effect from 11 November 2022 which allow the secretary of the Department of the Treasury to make this information mandatory. The government is encouraging franchisors voluntarily to provide the additional disclosure information now, but they can choose to wait and provide this information once it becomes mandatory to do so. Administrators will contact all registered franchisors when the requirement to provide additional disclosure information becomes mandatory.
It is also currently optional for franchisors to upload their standard form franchise agreement, disclosure document, and key facts sheet. Franchisors who choose to provide these documents must redact information relating to particular franchisees or personal information of individuals prior to publishing any documents (or any links to websites that publish documents) on the Register. Franchisors may also redact information that is of a commercial nature and is commercially sensitive. However, full and complete disclosure documents must still be provided directly to prospective franchisees in accordance with the Code.
How do I answer these questions?
Franchisors should closely check the information they present in the Register to ensure that it is not false, misleading or deceptive. Normally, the information provided to the Register should be consistent with the information set out in the disclosure document. However, because of the way the questions or prompts are phrased in the Register portal, it is not always possible directly to reproduce information set out in the disclosure document. Information may need to be rephrased, or given in a different form, to be both meaningful and accurate.
Updating the information
The information on the Register must be updated at least once for each financial year, on or before the 14th day of the fifth month following the end of the previous financial year.
For franchisors that are exempted from updating disclosure documents under the Code (ie where the franchisor entered into no or only one franchise agreement in the previous year and has no intention of entering into another franchise agreement in the next year), the franchisor must still maintain a presence on the Register, and update their Register profile each year. As long as the exemption stands, the franchisor is not required to publish updated disclosure information on the Register.
Actions you can take now
- Check that you have complied with the obligations outlined above.
- Please contact us if you require assistance with creating a franchise profile and providing the mandatory information on the Register by 14 November 2022.
- The currently voluntary information is likely to become mandatory in the near future. Please contact us for assistance with providing that information.