IMPORTANT FRANCHISING UPDATE
The Franchising Code of Conduct (Code) has been amended. The amending Regulations were released on Thursday and make changes to the provisions dealing with the Franchise Disclosure Register. They provide that the Secretary of the Department of Treasury may make determinations for additional documents and information that Franchisors must publish on the Franchise Disclosure Register.
Please find link to the amending Regulations https://www.legislation.gov.au/Details/F2022L01445 and a link to the determination made by the Secretary of the Department of Treasury https://www.legislation.gov.au/Details/F2022L01454
The changes to the Code take effect from 11 November 2022 and mean the optional information included in the Franchise Disclosure Register becomes mandatory on 14 November 2022.
The determination requires franchisors to provide the following information by 14 November 2022:
- the number of years that the franchise or franchise system has operated in Australia;
- the number of existing franchised businesses and franchisees and businesses owned or operated by the franchisor or an associate of the franchisor in Australia that are substantially the same as the franchised business;
- each State or Territory in which a business or franchisee covered by paragraph (a) operates;
- in relation to a franchisor’s requirements for the supply of goods or services to a franchisee—whether there are restrictions on the acquisition of goods or services by the franchisee from other sources;
- if the franchisor requires payment before a franchise agreement is entered into—why the money is required, how the money is to be applied, who will hold the money, and the conditions under which a payment will be refunded;
- details of the costs payable by a franchisee to start operating the franchised business; Example: Details of costs may include upper and lower limits of potential costs, a description of potential costs or both.
- details of payments payable by a franchisee to the franchisor, or an associate of the franchisor, during the term of the franchise agreement; Example: Details of payments may include upper and lower limits of potential payments, a description of potential payments or both.
- details of payments payable by a franchisee to a person other than the franchisor or an associate of the franchisor; Example: Details of payments may include upper and lower limits of potential payments, a description of potential payments or both.
- whether the franchise agreement may be varied, unilaterally, by the franchisor;
- the term of the franchise agreement;
- whether a franchisee has an option to renew the franchise agreement;
- whether a franchisee has any rights relating to any goodwill generated by the franchisee; and
- whether the franchise agreement includes a restraint of trade or similar clause.
Franchisors who have already published their profiles should log into the Franchisor Disclosure Register and update their profiles. Please note that there are slight language differences between the questions above and the questions previously on the Franchise Disclosure Register. Accordingly franchisors should read the questions carefully and seek advice as to the information to be provided.
Please note that the amending Regulations will need to be handed out with compilation 8 of the Code to franchisees until a new consolidated version of the Code is available.