Contents
When you’re a franchisor, your responsibilities begin very early on. From the moment you talk to your first potential franchisee right down to when the franchise agreement might come to an end – at each phase you’ll be required to fulfil your duties and obligations.
When done correctly, taking the proper measures and following your legal duties can make the franchise process much more transparent, open and smoother. On the other hand, not doing so can lead to some pretty serious consequences.
The Franchise Disclosure Register is one of the most important aspects of becoming a franchisor. As a franchisor, ensuring you’re giving truthful and updated information to the public about your franchise is essential, which is exactly what the Franchise Disclosure Register requires you to do.
Let’s talk about the Franchise Disclosure Register in more detail.
What Is The Franchise Disclosure Register?
The Franchise Disclosure Register is essentially a platform, powered by the Treasury Department of the Australian Government. The register aims to provide the public with more information about franchise businesses in Australia.
The main purpose of the register is to provide anyone thinking of becoming a franchisee with information they can easily access about franchises, so they can make well informed decisions.
Even though it may seem like the Franchise Disclosure Register only benefits the public, it’s actually pretty advantageous for businesses as well. As a franchisor, you’re required to be honest and transparent about your business to all franchisees, at every stage of your relationship.
If a franchisee feels like they have been misled, then this could lead to pretty messy disputes. Ensuring you have provided all the relevant and correct information on the disclosure not only helps keep the public and potential franchisees informed, it aids in protecting your liabilities as well.
Why Do I Need Legal Help For My Franchise Disclosure Register?
As the Franchise Disclosure Register is a pretty comprehensive set of questions that will be posted publicly, it’s a good idea to get a legal expert to help out with what you’re publishing online about your business.
When you take a look at the format, you’ll find the franchise disclosure register asks some administrative questions about your business. These include:
- Contact information
- ABN
- Industry division
- Business description
- Number of franchises
- Location of franchises
It’s a good idea to have these details sorted and all your numbers finalised prior to filling out your questions. Along with the administrative questions, the disclosure also requires you answer more comprehensive and complex questions, detailing matters such as:
- The cost of establishing the franchise business
- Whether payment is required prior to entering into a franchise. If so, the amount of money required as well as the purpose for this payment
- Details regarding the length and potential extension of the franchise agreement
When providing answers to questions like these, it’s imperative to ensure the information on there is not only correct however, it’s also presented in a way that can’t be misconstrued.
Fortunately, that’s where legal experts excel.
A legal expert can clearly and concisely present the information needed. That way, you can be assured everything is being communicated as it needs to be. If information is misleading (even by accident) this can cause some headaches down the line – it’s always a wise idea to get a legal expert to help out, that way you know everything is being handled correctly.
What Happens If I Don’t Update The Franchise Disclosure Register?
Updating the Franchise Disclosure Register is a legal requirement. If you are currently a franchisor who has completed a franchise disclosure (more on this later) prior to 31 October 2022, then you should already be on the register.
If you haven’t yet become a franchisor but are considering it, then you need to make sure you’re on the Franchise Disclosure Register at least 14 days before you sign a Franchise Agreement.
Failing to add your business to the register when it should be there is considered a breach of the Franchising Code of Conduct. Therefore, you risk incurring legal penalties the longer you wait to put your business on the register.
Aside from legal penalties, if a potential franchisee notices you haven’t added your business to the register, it might cause them to lose interest in your business. Putting yourself on the register demonstrates legal compliance and transparency – two very important qualities for any franchisor.
If you’re a franchisor and you’ve already completed the task of getting your business’s details on the Franchise Disclosure Register – then great! However, it’s important to update those details (or confirm they are still correct) at least every year.
What Is A Franchise Disclosure Document?
A franchise disclosure document is like a ‘cheat sheet’ about a franchise. It contains a summary of important information that a franchisee may need to know, before entering into business with a franchisor.
The Franchise Code outlines what needs to be included in every disclosure document. Essentially, it covers matters regarding set up costs, capital expenses, litigation, supply information and the contact information of other franchisees and much more.
A franchise disclosure document is handed to a potential franchisee at least:
- 14 days before entering into a franchise agreement together
- 14 days before they make a payment which is non refundable
Needless to say, the above are all legal requirements. Therefore, as a franchisor, having your franchise disclosure documents ready is a must. If you’ve already got your franchise disclosure documents, then it’s imperative to ensure you’re keeping them updated. The last thing you want is to give a potential franchisee a disclosure document with outdated information. We’ve written more about this in our article, Updating Your Franchise Disclosure Document: What You Need To Know.
If you need help with updating your Franchise Disclosure Document, our legal experts are available and happy to do so.
What Other Responsibilities Do I Have As A Franchisor?
The Franchise Disclosure Register and the Franchise Disclosure Document aren’t the only legal obligations you have if you plan on turning your business into a franchise.
Franchising is a pretty regulated area. If you’re a franchisor, then franchisees are more often than not, in a vulnerable position to you. Even though you might mean well, good intentions don’t always eliminate a power imbalance. Therefore, strict rules such as those in the Franchising Code of Conduct are there to protect franchisees from getting taken advantage of the franchise market.
As a franchisor, it’s imperative to be familiar with the code and follow it completely. Not doing so can lead to legal penalties and your franchisees potentially suffering a loss – which could end up being a messy situation altogether. We understand the code is a bit of a complex document, so it’s always a good idea to get a legal expert in franchising to help explain things to you.
Furthermore, it’s also a worthwhile investment to get the help of a legal expert when it comes to your franchise legal documents. To turn your business into a franchise, there’s going to be a number of legal documents you’ll need – the exact ones depending on your unique situation. Expertly drafted documents will help protect both your business and your franchisee, plus it can help facilitate a smooth business relationship right from the start. You can learn more about the legal documents needed for franchising here.
Next Steps
The Franchise Disclosure Register is an important part of your legal obligations as a franchisor. Ensure it’s done correctly, seek the help of a legal expert. To summarise what we’ve discussed:
- Fulfilling responsibilities as a franchisor is crucial from the initial stages of engaging with potential franchisees to the end of franchise agreements
- Compliance with legal duties, including maintaining transparency, is vital to avoid serious consequences
- The Franchise Disclosure Register, overseen by the Australian Treasury Department, aims to provide transparent information about franchise businesses to the public
- Accurate and updated information on the register benefits both potential franchisees and franchisors by fostering informed decision-making and protecting against disputes
- Legal assistance is recommended for completing the comprehensive set of questions on the register, ensuring accuracy and clarity in the provided information
- Failure to update the Franchise Disclosure Register can lead to legal penalties and may deter potential franchisees due to perceived lack of transparency
- Franchise Disclosure Documents are essential summaries of important franchise information, mandated by legal requirements, and must be provided to potential franchisees at least 14 days before certain milestones
If you would like a consultation on the franchise disclosure register, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
Get in touch now!
We'll get back to you within 1 business day.
Top 3 Legal Mistakes
Book in a free consultation with us to discuss your legal needs.