Changes to the Franchising Code commencing 1 April 2022 will introduce an online public Register of franchises in Australia from later this year.
Anticipated for some time, the Register and will add to the annual compliance requirements for most franchisors. However, the information required to be filed is significantly reduced from that suggested in the Government's 2021 Exposure Draft legislation.
Documents optional, not mandatory
The 2021 Exposure Draft of the changes had required franchisors to file disclosure documents, standard franchise agreements and key facts sheets with some, but limited, redaction allowed for commercially sensitive information. The final changes do not require any documents to be filed. A franchisor may choose to file its disclosure document, key facts sheet or standard franchise agreement, with personal information and commercially sensitive information redacted. It has no obligation to do so, and it is probable that most franchisors will not.
The information that is required to be filed is minimal and of limited use to a potential franchisee, who will receive it in a franchisor's disclosure document in any event. It is difficult to understand how this information will "increase transparency of the operation and structure of franchise systems" as the Government maintains.
The only information required to be included by a franchisor will be:
- its name and the name under which the franchisor carries on business in Australia relevant to the franchise (if any);
- its Australian Business Number, if it has one;
- the addresses of its registered office and principal place of business in Australia (if any);
- its business telephone number and email address; and
- the industry classification code used by the Australian Bureau of Statistics for the industry in which the franchised business operates.
Some franchisors are excluded
Franchisors who have a disclosure document in the form required by the Franchising Code who provide a copy to a prospective franchisee on or before 31 October 2022 must register by 14 November 2022.
Franchisors who issue an Australian disclosure document after 31 October 2022 must register at least 14 days before they enter into a franchise agreement with the prospective franchisee.
There is no automatic consequence of failing to register as and when due. Failing to do so will not automatically invalidate a franchise agreement, but a penalty of up to AUD 133,000 could be imposed for the failure.
A franchisor who has no more than one master franchisee will not be required to register, but their master franchisee will be required to do so.
Once registered, the franchisor's details will remain on the public register until:
- replaced by the franchisor;
- removed after 18 months, unless the franchisor has confirmed that the information remains current; or
- the franchisor requests its removal because it has ceased to operate the franchise or the franchise system. This does not appear to allow a franchisor to deregister if it is not granting new franchises but retains franchises in Australia.
Annual updates required
The filing obligation will not be a one-off requirement. Each year, a franchisor who is registered will be required to "confirm" that the information remains accurate, or update the information. It appears that this may require a franchisor to formally confirm each year that the information remains accurate: an unnecessary and overly bureaucratic requirement, to be contrasted with other Government registers which only require notification when information changes.
Annual updates or confirmations will be required by the 14th day of the fifth month following the end of the franchisor's financial year.
The Exposure Draft legislation had included an obligation to file on the Register on an ongoing basis any changes to the "materially relevant facts" a franchisor must advise to franchisees and prospective franchisees under clause 17 of the Code. Thankfully, this additional and onerous filing requirement does not appear in the final version of the legislation.
The registration process and technical requirements will not be clear until later this year when the online Register becomes available.
Franchisors should diarise September or October for initial registration and build in annual registration updates into their year end compliance processes.