Key Takeaways:

• Franchisors must, if they haven’t already, create a profile on the Franchise Disclosure Register as soon as possible and provide the mandatory information.
   
• The profile and information provided should be updated at least annually. Franchisors should also take care to make sure the information provided is consistent with their disclosure document and key facts sheet.

In late 2021, the much-anticipated Franchise Disclosure Register was announced by the government of the day. Around that time, Holman Webb dove into what the register would look like, and what franchisors would need to do to prepare for its introduction. See our November 2021 article ‘The Franchise Disclosure Register – What is it and When Does it Begin?’.

The register is now in force

The deadline for franchisors was 14 November 2022.  From that time, franchisors (with limited exceptions) must have a profile on the register. However, the information that franchisors are required make available has changed significantly from what was announced 2021.

Initially, the draft laws required franchisors to upload a copy of their disclosure document to the register. Franchisors must maintain and update their disclosure document annually. It is designed to give franchisees relevant information about the system and their franchise.

The disclosure document includes a list of current franchisees and their contact information, details concerning the background of key people involved in the system, information about the franchisor’s financial position - plus much more.

The draft laws raised concerns about the disclosure of information (both personal information and commercial in confidence material) contained within the disclosure document. Ultimately, the draft laws were changed, so that franchisors can, but are not required to, upload their disclosure document.

In a similar vein, franchisors can, but are not required to, upload their standard form franchise agreement and key facts sheet.

Based on the current state of the register, it appears that only a small minority of franchisors have decided to make these documents public.  

In lieu of uploading the disclosure document, franchisors must now answer a list of questions – with their answers being made available to anyone who views the register. Most of these questions were voluntary when the draft laws were released, but they are now mandatory.

The questions include:

• the number of years that the franchise or franchise system has operated in Australia;
• details of the costs payable by a franchisee to start operating the franchised business;
• details of payments payable by a franchisee to the franchisor, or an associate of the franchisor;
• whether a franchisee has an option to renew the franchise agreement;
• whether a franchisee has any rights relating to any goodwill generated by the franchisee; and
• whether the franchise agreement includes a restraint of trade or similar clause.

This information will all come from the franchisor disclosure document and is usually discussed with prospective franchisees at an early stage in the process anyway.     

While there were last minute changes, and there do appear to be some initial teething problems, the main takeaways for franchisors are:

• franchisors must, if they haven’t already, create a profile on the register as soon as possible and provide the mandatory information; and
• the profile and information provided should be updated at least annually. Franchisors should also take care to make sure the information provided is consistent with their disclosure document and key facts sheet.

For franchisees and those interested in buying a franchise, the register provides an opportunity to quickly access information regarding possible options. Having information regarding the setup and ongoing costs, the standard length of the franchise agreement and the usual right to renew all in one place makes the comparison process easier for potential franchisees.

If you have a query relating to any of the information outlined above, or would like to speak with Daniel Jepson, Senior Associate within Holman Webb’s Holman Webb’s Franchising & Retail Group with regard to a matter of your own, please don’t hesitate to get in touch today.