It seems we can’t have much time go by without the government fiddling with the Franchising Code of Conduct. Well, this time they have passed two different amending Acts only a fortnight apart. Oddly, the first lot of changes (passed on 17 March) don’t come into effect until 15 April 2022 which is after the second lot were passed into effect on 1 April. Its all a bit confusing.
To be fair they have been talking about these changes since mid-last year so they are not a big surprise. So what do you need to know?
Let’s start with the first lot of changes, while they don’t come into effect until 15 April they are going to be of importance to you if you are a franchisor pretty much straight away.
There is now a big super penalty which can apply to breaches of select provisions. These are the provisions about updating franchisees with changes to the financial information and specified information in the disclosure document under clause 17 (such as if a franchise system is sold) and the provision about not preventing franchisees from associating with each other. There are some others too but these only apply to new vehicle dealerships.
If a corporate franchisor breaches a super penalty provision then the penalty maximum is the greatest of $10 million or 3 times the value of the benefit from the breach or 10% of the annual turnover.
Penalties- double your money!
All the other penalty provisions have been doubled to 600 penalty units (currently equals $133,200) and a few that were not penalty units have been clarified so that they are now.
Prior Disclosure of Information Statements made mandatory
It is now specified that the Information Statement issued by the ACCC must be given no later than 7 days after a prospective franchisee expresses an interest. And this is now a penalty provision! So franchisors should make it automatic to issue this document to absolutely anyone who enquires about a franchise no matter how remote a chance that they will end up being accepted.
Franchise Disclosure Register
Now these changes are effective 1 April – they are not a joke but establish the long-expected Franchise Disclosure Register. The register will be a free online resource for the general public and the relevant information has to be submitted by franchisors by 14 November 2022.
The trouble is that we don’t yet know exactly what information other than the basic details such as franchisor name, ABN, address and contact information will be required. The government may require the disclosure document (with sensitive information redacted) or the Key Facts Sheet or even the standard form of franchise agreement – however we will need to wait and see. The information on the register once established will need to be updated annually.
Needless to say failure to comply will result in a penalty.
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.