Current and potential franchisors in Australia should ensure that they are familiar with the requirements of the new Franchise Disclosure Register (the "Register"), which will go live on 15 November 2022.
On 1 April 2022, the Franchising Code of Conduct in Australia (the "Code") was amended by the Competition and Consumer (Industry Codes - Franchising) Amendment (Franchise Disclosure Register) Regulations 2022. The regulations provided for the creation of the Register. The Register will be accessible to all and can be used by prospective franchisees and their advisors to search and view information on franchisors. The purpose of the Register is to increase transparency and accountability within the franchise sector.
The following is a high-level summary of some of the key points that franchisors operating in Australia should be aware of in relation to the Register.
Who is required to register?
A franchisor is required to create a profile on the Register if:
- they are required under section 8 of the Code to maintain a disclosure document; and
- in the case where the franchisor is the master franchisor of a franchise system, where the master franchise system has two or more sub-franchisors.
Where a master franchisor has only one Australian sub-franchisor, and does not intend to grant further franchises, then they shall be exempt from the requirement to create a Register profile, however their master franchisee will still be required to do so.
By when do franchisors need to be registered?
All franchisors who issue a disclosure document on or before 31 October 2022 must complete a franchise profile and upload key disclosure information prior to the date that the Register goes live (i.e. by the 14th November 2022).
Franchisors who issue a disclosure document after 31 October 2022 will need to be included on the Register at least 14 days before entering into a franchise agreement with a prospective franchisee.
What information needs to be provided?
Prior to the deadline, franchisors must upload key information to the Register such as its name, address, contact details and Australian Business Number ("ABN"). They will also need to confirm the Australia and New Zealand Industry Standard Industrial Classification division and subdivision codes for the industry in which their franchise business operates and confirm the financial year on which it operates.
Additionally, whilst not yet mandatory, franchisors will soon be required to upload further information about the franchise business, such as how long it has operated in Australia and the number of franchisees currently in the network.
Providing this information is currently voluntary due to changes being required to correct a regulatory limitation on mandating the provision of this information. Franchisors are encouraged to voluntarily provide the information now, but can choose to wait until it becomes mandatory if they wish to do so.
Franchisors are subject to a continuing obligation to update the Register, or confirm that the information on the Register is correct, at least once every financial year.
Franchisors are not currently obligated to upload their standard form franchise agreement, disclosure document or key facts sheet. However, the information that is submitted must be consistent with the information contained in the franchisor's most recent disclosure document.
What are the penalties for non-compliance?
A breach of the Code is a breach of the Competition and Consumer Act 2010, which will entitle a party that has suffered loss or damage as a result of the breach to compensation. A court will have the power to grant an injunction, require specific performance, declare void in whole or part any agreement, vary any contract or arrangement or make such other orders as a court thinks appropriate in response to a breach.
Fines of AU$133,200 (£73,760) apply for breaches of key provisions of the Code and the Australian Competition and Consumer Commission ("ACCC") may investigate breaches which are brought to their attention and may issue proceedings or infringement notices of $13,320 (£7,376) per breach. On application by the ACCC, a court can award additional sanctions of up to the higher of:
- $10 million (£5,537,470);
- where the value of the benefit attributable to the breach can be ascertained, 3 times the value of that benefit; or
- where the value of the benefit attributable to the breach cannot be ascertained, 10 per cent of the annual turnover of the breaching company.
How can information be uploaded to the Register?
Australian franchisors will be able to upload to the Register via the MyGov process. This involves obtaining a digital signature, setting up a corporate MyGov ID and then link this digital identity to the Relationship Authorisation Manager.
Franchisors may also authorise a representative to access and update the Register on their behalf. Such representatives will be required to set up their own digital identity and will need to be authorised to act on behalf of the franchisor's ABN for interactions with the Department of the Treasury, which can be given via MyGovID’s Relationship Authorisation Manager.
At the time of writing, the Register is only able to authenticate franchisors using their digital identity, which requires businesses to have an ABN and an Australian based officer. The Register website states that organisations without an ABN should email firstname.lastname@example.org for options for creating a profile.
Co-authored by Jamal Moursy.
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