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Introduction of National Business Names Register – What it means for Franchisors

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 by: Raynia Theodore, Principal of Franchising, Mason Sier Turnbull

The new National Business Names Register (“Register”) commenced on 28 May 2012. The Register is an online register, operated by the Australian Securities and Investments Commission (“ASIC”).  It is a national register of business names. Previously each State and Territory had its own register which meant organisations that operated nationally had to maintain business name registrations in each State and Territory, imposing an administrative burden and cost on such organisations. 

 With only one application now required to register a business name nationally, the new system will ensure the administration costs and burden for businesses operating in multiple States or Territories are drastically reduced.

 All business names registered on the various Sate and Territory registers automatically transferred to the Register on 28 May 2012. However, please note some information did not transfer properly to the Register and ASIC is working on rectification.

 In relation to what the changes mean for franchise networks please note:

  1. As was the case prior to 28 May 2012, if a franchisee proposes to trade under a name that is not its own entity name (i.e. company name) the franchisee will need to register a business name.  For most franchise networks the business name is usually the name of the franchise followed by the territory or location from which the franchise business operates. For any franchisee who has not registered a business name, they should be notified to register their business name.
  2. Registration of a franchise business name no longer requires the franchisee to provide the written permission of the franchisor to ASIC. However, any business that applies to register a franchise business name should ensure it has authority to trade under that name through its franchise agreement. ASIC will advise applicants on the online Register that it is still the responsibility of each business to ensure they have the requisite authority and that they do not pass off as another business or infringe on other businesses’ trademarks.
  3. There is some concern that businesses will be able to utilise the goodwill of well-known franchise brands by adding geographical differentiators after a business name. The onus will be on franchisors to regularly check the Register to ensure that only authorised franchisees have registered business names in the name of the franchise. Franchisors should also develop systems to ensure franchisees only register business names once settlement of the purchase has occurred and/or the franchise agreement has been signed by the franchisee.
  4. We recommend franchisors should conduct an audit of all existing registered business names to ensure they have been correctly transferred to the new Register and to also determine whether to cancel the registration of business names that are no longer required (e.g. because the franchise has ceased to operate).

It is not currently clear how ASIC will deal with the cancellation of franchisee business names in circumstances where the franchise has ceased to operate or the franchisee’s franchise agreement has been terminated or has expired.  As the Register is an online register there is no need for franchisors to hold pre-signed business name cancellation forms to enable the franchisor to cancel the registration of the business name upon termination or expiry of a franchise agreement

Franchisors may need to amend their franchise agreements to ensure they have the power to cancel the registration of a business name upon termination or expiry of a franchise agreement.

Finally, franchisors need to ensure that service addresses are up to date.  Renewal notices will be sent by ASIC to existing service addresses provided by the state and territory agencies.  

Should you have any queries or require more information about the operation of the Register please contact Raynia Theodore, Esther Gutnick or Jane Garber on +61 3 8540 0200.