Franchising Code of Conduct Update

Introduction

The Australian Competition and Consumer (Industry Codes – Franchising) Regulation 2014 (Cth) (Franchising Code) was amended in November 2022 to introduce a new obligation for franchisors to create and maintain a profile on the Franchise Disclosure Register (Register) that is hosted and administered by the Department of Treasury. Franchisors now have the obligation to provide certain information for public listing on the Register.

The new amendments are intended to increase franchisor transparency and access to disclosure information for prospective franchisees to make an informed decision prior to entering into a franchise agreement.

Information required

• Franchisors must provide the following basic profile information on the Register:

• entity name;

• trading name;

• ABN;

• business email addresses and contact phone number;

• address of the franchisor;

• industry division and subdivision; and

• financial year on which the franchisor operates.

Obligation to update information

A franchisor will be required to update its disclosure document and key facts sheet within 4 months after the end of each financial year if:

1. it has entered into more than one franchise agreement during the year; and

2. it intends to enter into another franchise agreement in the following financial year.

If the franchisor satisfies the above requirements, it must also update its profile on the Register with the following additional information:

• length of operation of the franchise system in Australia;

• number of franchisees in the system;

• states/territories in which the franchisor operates in;

• any restrictions on franchisees choosing suppliers;

• information about payments and costs;

• whether there are any rights for the franchisor to vary the franchise agreement without franchisees’ consent;

• standard term of franchise agreements;

• whether franchisees are given the option to renew a franchise agreement;

• whether franchisees are entitled to compensation for goodwill in the business; and

• whether franchisees are subject to a restraint of trade clause.

Other ongoing obligations

In addition to the obligations mentioned above, franchisors must also ensure that they comply with the following additional ongoing obligations under the Franchising Code to avoid being penalised:

1. Franchisors or the funds administrator of the marketing fund (or other cooperative fund) must within 4 months after the end of the last financial year, prepare an annual financial statement detailing all of the funds’ receipts and expenses for the last financial year and have the statement audited by a registered company auditor within 4 months after the end of the financial year to which it relates. This applies unless 75% of the franchisees in Australia who contribute to the fund vote in favour of waiving such an obligation.

2. Franchisors must keep any written thing, document or notice that is receives for at least 6 years after it is created.