For most Australian franchise systems/franchisors 31 October is a key date annually.
For every franchisor with a standard 30 June end of financial year, it is the date by which the annual Franchise Disclosure Document must be updated and signed off in accordance with the Franchising Code of Conduct. The previous financial year’s financial statement must be included and details of franchisees, system changes etc must all be updated. Additionally, a new Key Facts Sheet must be created.
From October 2022 a new requirement was introduced – by 2 weeks after the disclosure update deadline date (that is by 14 November for most) franchisors must also lodge certain mandatory details on the Franchise Disclosure Register (Register).
The Register can be accessed by anyone for free at https://franchisedisclosure.gov.au/Register to search the profiles of Australian franchisors.
- The following mandatory basic business details must be provided by each franchise system:
- Name, trading name and ABN
- Business email address and contact phone number
- Address(es) of the franchisor
- ANZSIC division and subdivision codes for the industry in which the franchised business operates (Codes are found here https://www.abs.gov.au/statistics/classifications/australian-and-new-zealand-standard-industrial-classification-anzsic/2006-revision-2-0/numbering-system-and-titles/division-and-subdivision-codes-and-titles)
- Financial year on which the franchisor operates
- The following questions are also required to be answered:
- How long has the franchisor operated the franchise or franchise system in Australia?
- The number of franchisees in the system (including franchisor operated businesses)
- In which states/territories does the franchisor currently operate?
- Does the franchise system restrict franchisees choosing suppliers?
- Information about payments and costs
- Does the franchisor’s standard form franchise agreement allow the franchisor to vary the agreement without franchisees’ consent?
- What is the standard term of franchise agreements?
- Are franchisees given the option to renew a franchise agreement?
- Are franchisees entitled to compensation for goodwill in the business?
- Are franchisees subject to a restraint of trade (or similar) clause?
- Much of this information was previously not available until a prospective franchisee made application to the franchisor and is sent a copy of the relevant disclosure document. Some franchisors have chosen to include their disclosure documents on the Register although this is not required.
- Search functions and filters allow a prospective buyer to find all the franchisors in a particular sector and allow some comparison of the data. This is a great initial tool for anyone considering buying a franchised business.
- Needless to say, if a franchisor or system cannot be found on the Register then a buyer should raise this with the franchisor or their lawyer. Failure to appear on the Register is a breach of the Franchising Code of Conduct and should be a red flag to any buyer.
- The profile of each Franchisor published on the Register will need to be updated as required each year following preparation of their annual Disclosure Document (usually October each year).
If you are an intending franchise buyer looking for guidance from an experienced franchise lawyer and please feel free to contact Keypoint’s franchising and retail law specialist, Corinne Attard.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please also note that the law may have changed since the date of this article.