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Are you Across Your Obligations Relating to the Franchise Disclosure Register and the New and Increased Penalties for Breaches of the Code?

From 1 July 2022, Australian franchisors will be required to upload their Key Fact Sheet to the Franchise Disclosure Register in a move to improve transparency and accountability within the franchise sector.

From 14 November 2022, Australian franchisors will be required to upload key information about their franchise system to the Franchise Disclosure Register in a move to improve transparency and accountability within the franchise sector. The introduction of the Franchise Disclosure Register aims to assist prospective franchisees by requiring franchisors to provide key information about the franchise system which will be made available to the public.

The Register was initially announced as part of the Federal Government’s 2021/2022 Budget, with $4.3 million committed to the development of the Franchise Disclosure Register. 

The purpose of the Register is to increase transparency and accountability within the franchise sector and so, from 14 November 2022, Australian franchisors will be required to upload their Key Fact Sheet to the Franchise Disclosure Register.

What Do Franchisors Need to Do Within the Franchise Disclosure Register?

The Register is hosted on the Treasury website and Treasury staff are responsible for maintaining the register, providing technical assistance, and conducting post-implementation policy reviews. A Director of the franchisor is required to use a myGov login to provide prescribed information about the franchisor and the franchise system. Franchise Agreements and Disclosure Documents can also be uploaded; however, as they include confidential information, we anticipate the majority of franchisors will just upload their Key Fact Sheet. 

Franchisors will be required to update information about the franchise system annually by 14 November.

Compliance with the obligation to meet the registration requirements will be enforced by the ACCC, as with the remainder of the obligations set out in the Code. Penalties apply for failing to register a franchise system on the Register so it is important to ensure franchisors meet the deadline of 14 November.

Updates to the Penalty Provisions in the Franchising Code of Conduct

The Australian Government has recently announced that penalties for breaching the Franchising Code will increase and that more clauses of the Code are to carry penalties going forward. 

These changes will apply from 15 April 2022. Here is a quick summary of the changes to the penal provisions. 

When a penalty applies, in most instances the maximum penalty will be up to $133,200; however, there are certain provisions which are subject to harsher penalties. These provisions include:

  • Disclosing materially relevant facts (Clauses 17(1) and (2)
  • Restricting the freedom of association of franchisees or prospective franchisees (clause 33)
  • Terms of agreement for new vehicle dealership agreements (clauses 46A(1)-(3)).

For the provisions above, the maximum penalties for corporations will be the greater of $10,000,000, three times the value of the benefit received or 10% of annual turnover in the preceding 12 months (if the court cannot determine the benefit obtained from the offence).  In relation to individuals, the penalties will be $500,000.

If you require any more information about your obligations as an Australian Franchisor in relation to the Franchise Disclosure Register, please reach out to our BlueRock franchise lawyers

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