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New Compilation of the Franchising Code of Conduct and Establishment of the Franchise Disclosure Register

27 May 2022

By Raynia Theodore, Partner

On 26 April 2022, compilation 8 of the Franchising Code of Conduct (‘Code’) was registered and released, incorporating all amendments to the Code made since December 2021, including the changes to the penalties and the introduction of the Franchise Disclosure Register. A copy of the latest compilation of the Code can be viewed here.

For further information regarding the changes to penalties refer to our previous article available here.

The amending Regulations regarding the Franchise Disclosure Register insert a new Part 5A to the Code which outlines the establishment and framework of the Franchise Disclosure Register (‘Register’).

What is the Franchise Disclosure Register and who must register?

The Register a public database of franchisor profiles in Australia. Its intended purpose is to assist prospective franchisees in making informed decisions and conducting their own due diligence before entering into a franchise agreement, by allowing them to search the Register for relevant information and documents relating to franchise systems by industry.

The Code requires certain information to be provided for inclusion in the Register. In addition to the required information, clause 53A(3) also allows franchisors to voluntarily upload certain documents namely, their Disclosure Documents, Key Facts Sheets and standard form Franchise Agreements, noting that before a document is provided for inclusion in the Register, certain information must be redacted from the document. This includes any personal information that relates to an individual other than the franchisor or information that relates to a particular franchisee or a particular site being occupied by a franchisee. In addition, franchisors may choose to redact from the document information that is of a commercial nature and is commercially sensitive.

Clauses 53C and 53D set out the initial obligation to provide information for inclusion in the Register, separated into two categories:

Clause 53C – Firstly, those franchisors that created a Disclosure Document pursuant to clause 8 of the Code and gave a copy of the Disclosure Document pursuant to clause 9 of the Code on or before 31 October 2022; and

Clause 53D – Secondly, franchisors who are proposing to enter into a franchise agreement with a prospective franchisee and are required to give a copy of the Disclosure Document pursuant to clause 9 of the Code which have not previously provided information relating to the franchise for inclusion in the Register under clause 53C.

If the franchisor is a master franchisor in a master franchise system with two or more sub franchisors, they are also required to register, however if there is only one sub franchisor in the master franchise system, the master franchisor will be exempt from registration.

For those franchisors that fall within clause 53C of the Code, the deadline to provide initial information for inclusion in the Register is 14 November 2022 with the Register becoming available to the public on 15 November 2022. Franchisors who fall within clause 53D of the Code must provide the initial information at least 14 days before entering into a franchise agreement with a prospective franchisee.

To commence the registration process, franchisors must create a franchise profile on the Register by logging in with MyGovID linked to the franchisee’s ABN. The link to log into the Register and commence this process can be found here.

What information must be provided for inclusion in the Register?

The information which must be provided by franchisor for inclusion in the Register is set out in clause 53C(2)(a)-(g) and 53D(2)(a)-(g) of the Code. It includes:

  • the name of the franchisor;
  • the name under which the franchisor carries on business in Australia relevant to the franchise;
  • if the franchisor has an ABN – the franchisor’s ABN;
  • the address, or addresses, of the franchisor’s registered office and principal place of business in Australia;
  • the business telephone number and email address of the franchisor;
  • the ANZSIC division and subdivision codes for the industry in which the business operated under the franchise operates; and
  • any other information that the Secretary of the Department that is administered by the Minister of the Australian Small Business and Family Enterprise Ombudsman Act 2015 may require to be provided to it.

Ongoing obligation to update Register

If clause 53C or 53D applies to a franchisor, at least once each financial year and on or before the 14th day of the fifth month following the end of the financial year, franchisor must either:

  • confirm that the information on the Register remains current, confirming that the information is correct; or
  • to the extent that the information is incorrect, out of date or has not previously been provided for inclusion in the Register by the franchisor, provide or update the information.

This means that franchisors whose financial years end on 30 June, must provide the confirmation or update the Register by 14 November each year.

Penalties

Failing to provide initial information under clauses 53C and 53D of the Code, as well as failing to confirm or update information included in the Register by the applicable deadlines each carry a maximum civil penalty of 600 penalty units. This currently equates to $133,200 per offence, so it is important that franchisors make note of the respective deadlines and comply with these new obligations.

What next?

Registrations are now open on the Register, so franchisors should commence creating their profiles and seek legal advice if they are unsure of their new obligations under the latest compilation of the Code, or require any further assistance.

Franchisors should also commence providing franchisees or prospective franchisees with the latest copy of the Code – Compilation 8.

If you have questions or require assistance in relation to the establishment of the Franchise Disclosure Register, the setting up of a profile on the Register, or your obligations under the Franchising Code, please do not hesitate to contact a member our Franchising Team  on +613 8540 0200 or as follows:

Raynia Theodore: raynia.theodore@mst.com.au

Esther Gutnick: esther.gutnick@mst.com.au

Philip Colman: philip.colman@mst.com.au

Alicia Hill: alicia.hill@mst.com.au