Recent update in Franchise Laws

Recently, in April 2022, a significant development occurred in the franchising landscape with the establishment of the Franchise Disclosure Register (the “Register“). This Register, introduced as an integral part of Part 5A of the Code through the Competition and Consumer (Industry Codes – Franchising) Amendment (Franchise Disclosure Register) Regulations 2022, serves to enhance transparency by requiring franchisors to register business details for franchisees and potential franchisees.

In November 2022, the Deputy Secretary of the Department of Treasury issued a determination that further mandates the obligation for franchisors to disclose additional information about their franchise business. This means that franchisors are now legally required to publicly share specific essential details in compliance with the Code.

Failure to comply with this requirement, including uploading the requisite information onto the Register or providing annual updates, could result in penalties of up to 600 penalty units, equivalent to AUD $660,000 for corporations.

We have outlined below the obligations and requirements that franchisors need to be familiar with regarding the mandatory disclosure of information.

1. What is the Franchise Disclosure Register

According to the official website, the Franchise Disclosure Register is intended to give prospective franchise buyers, current franchisees and professional advisers access to information that is important to know when making business decisions.

This Register is hosted by the Australian Government. All franchise content on the Register is published by franchisors and not by the Australian Government. For more information, please visit: https://franchisedisclosure.gov.au

2. Who and when to update the Franchise Disclosure Register

In Australia, most franchisors are obliged to register on the Franchise Disclosure Register. According to the Code, franchisors need to be listed on the Register if:

• a. They are required to maintain a disclosure document in accordance with the Code;
• b. They have provided a copy of their disclosure document to a franchisee or prospective franchisee on or before 31 October 2022; or
• c. If the franchisor does not issue a disclosure document until after 31 October 2022, that franchisor must be included in the Register at least 14 days prior to entering into a franchise agreement with a prospective franchisee.

However, certain franchisors may be exempt from this obligation. The exemption applies when the franchisor has entered into only one franchise agreement and has no intention to enter into another franchise agreement in the next year.

Franchisors are required to update the information on the Register at least once for each financial year. The deadline for updating is on or before the 14th day of the fifth month following the end of the previous financial year. It is essential to ensure the accuracy and relevance of the disclosed information to maintain transparency and comply with regulatory obligations.

3. Mandatory disclosure information checklist

Below is a checklist we summarised based on the Competition and Consumer (Industry Codes—Franchising) (Additional Information Required by the Secretary) Determination 2022: