Draft legislation released by the Federal Government proposes new obligations on franchisors to publish disclosure documents and other materials on a publicly available register.
Franchise Disclosure Register
The Federal Government has published exposure draft legislation that seeks to amend the Franchising Code of Conduct to introduce a publicly available Franchise Disclosure Register. The Register aims to increase transparency for prospective franchisees by imposing new disclosure obligations on franchisors.
If the legislation is passed without amendment, franchisors will be required to disclose:
- a redacted disclosure document
- general information about the franchise
- industry classification codes.
One disclosure document per franchise system must be uploaded to the Register. As the Register will be publicly accessible, franchisors will be required to redact certain information, including personal or franchisee-specific information.
Commencement of the Register
The Register is expected to launch on 31 March 2022, with franchisors required to post the relevant details and documents by 31 October 2022. Franchisors will then be required to update the information on the Register on an annual basis.
Franchisors will also be required to disclose ‘materially relevant facts’ on the Register, including:
- a change of ownership of the franchisor
- proceedings commenced against the franchisor
- any judgments entered against the franchisor.
This information will need to be disclosed within 14 days of the franchisor becoming aware of the matter.
A franchisor that fails to comply with these obligations may be subject to extensive penalties. Franchisors should pay close attention to the progress of this legislation to ensure they remain compliant with their disclosure obligations under the Franchising Code.