The Franchise Disclosure Register: A Proposed Amendment to the Franchising Code of Conduct
Due to the significance of franchising to the Australian economy, the Australian Government has proposed new regulations to promote competition and fair trading. The Competition and Consumer (Industry Codes – Franchising) Amendment (Franchise Disclosure Register) Regulations 2021 (the regulations) will introduce a public Franchise Disclosure Register (the Register). If passed, the regulations will insert a new Part 5A in the Franchising Code of Conduct. Part 5A will establish the Register and impose new disclosure obligations on franchisors. The material changes are as follows:
Clauses 53A and 53B
These clauses outline what matters are to be included on the Register, and empower the Secretary to adjust the contents of Register and correct errors or mistakes. Below is a list of some matters to be included in the Register:
- The name, location, and contact details of the franchise;
- Any franchise site restrictions or territory exclusivity;
- Information on establishments costs and prepayments of the franchise;
- Information on any payments payable by the franchisee;
- Conditions of financing arrangements;
- Historical and projected earnings of the franchise.
This clause outlines the transitional arrangements for how franchisors will transition to the new Register. This clause reflects the following requirements:
- Franchisors must update their disclosure document before 30 June 2022 and provide this for inclusion on the Register before 1 November 2022.
- Franchisors must also provide certain identifying business information, including the name of the franchisor and industry classification information.
- The Secretary may require information included in the disclosure document to be published on the profile page to allow for searches based on certain fields. This is to improve the accessibility of information on the Register.
- A maximum civil penalty of 600 penalty units applies to those who fail to provide the disclosure document and other required information.
This clause outlines the ongoing disclosure obligations that franchisors are subject to. Franchisors are expected to update the information published on the Register each year. This applies after 30 June 2022. A maximum civil penalty of 600 penalty units applies where a franchisor fails to update the information for publication on the Register.
From 30 June 2022, this clause will require franchisors to provide information about materially relevant facts which are not included in the published disclosure document. This information must be provided within 14 days of the franchisor becoming aware of any materially relevant matter. Failure to comply attracts a maximum civil penalty of 600 penalty units.
From 30 June 2022, if a franchisor does not need to update their disclosure document, they must upload a statement explaining why no changes need to be made. This must be supplied within 4 months after the end of the financial year. If this is not supplied, a maximum civil penalty of 600 penalty units may apply.
This clause stipulates that somebody may be authorised by the franchisor to fulfill the franchisor’s obligations in respect of the Register.
These proposed reforms are available for comment through 29 October 2021 on the Treasury website.
Whether you are a franchisor or franchisee, if you are entering or renewing a franchise agreement, clarify your rights and obligations before executing an agreement. To ensure that you comply with the changes in the Franchising Code of Conduct, talk to an experienced franchise lawyer today. Contact our team online, on (02) 4929 7002, or email us at email@example.com for personalised legal advice.