In line with recent efforts to increase transparency within the franchising sector, the Federal Government has released the details of its proposed Franchise Disclosure Register, and invited comment from interested parties.
The 2021-22 Federal Budget announced $4.3 million for the development of a new Franchise Disclosure Register, the next in a number of recent changes to improve transparency in the franchising sector in response to the Parliamentary Fairness in Franchising Report.
The Register is intended to assist prospective franchisees to make an informed decision before entering a franchise agreement, via a publicly available, self-service portal through which prospective franchisees can access relevant information provided by franchisors.
Once the Register is established, all franchisors will be required to upload certain documents and information to the portal, including:
- current disclosure documents already required under the Franchising Code of Conduct, but franchisors can exclude:
- personal information;
- information about individual franchise sites or franchisees;
- commercially sensitive information about rebates; and
- historical information; and
- other information to enhance the franchisor's profile and search functionality, including:
- simplified information within the existing scope of disclosure;
- Australian and New Zealand Industrial Classification (ANZSIC) information; and
- other information volunteered by franchisors, such as a brief description of the business and contact information.
Full and complete disclosure documents must still be provided to individual prospective franchisees in accordance with the Code, such as when negotiating or dealing with a franchisee to buy into a franchise system.
There will be ongoing obligations for franchisors to update the disclosure document and other materially relevant facts on the Register annually. Materially relevant facts are listed in section 17(3) of the Code. To minimise the burden on franchisors, the requirement to update information will operate in line with the current requirements to update existing disclosure documents under the Code. If no updates need to be made, there will be an obligation for franchisors to upload a notice explaining why no changes need to be made.
Civil penalties will be introduced for any failure to provide or update the required information on the Register.
When will the changes come into effect?
The expected go-live date for the Register is early 2022. There will be a transitional period to allow franchisors to understand the new requirements and participate voluntarily.
Under the proposal, all franchisors must have a profile and publish their latest documentation on the Register by 31 October 2022.
Next steps in the consultation process
Interested parties are invited to submit responses to this consultation by 29 October 2021. Submissions can be made to the Treasury at [email protected].
If you would like to explore the proposal's possible impact on your business, or want help to participate in the consultation process, please contact us.