Federal Government to create new franchise disclosure registry

Federal Treasurer Josh Frydenberg’s budget for 2021/22 has included plans to create a new mandatory franchise disclosure registry to help prospective franchisees access the information they need before signing up to a new franchise agreement.

The new registry comes will be created as part of a broader focus on dispute resolution for small and medium businesses announced by Treasurer Frydenberg on Tuesday, along with an increase in funding for the office of the Australian Small Business and Family Enterprise Ombudsman.

The mandatory franchise disclosure registry will receive funding of $4.3 million over a four-year period, starting in 2021/22.

According to the budget papers, the registry will “enable prospective franchisees to make an informed decision before entering a franchise agreement”.

In a media statement accompanying the papers, Federal Small Business Minister Stuart Robert said the measure recognises the large number of Australian SMEs that operate franchises, advising that the registry will aim to “increase transparency and restore confidence” in the franchising sector.

While full details of how the registry will work are not yet available, its announcement follows a warning from Australian Competition and Consumer Commission Deputy Chair, Mike Keogh this month for more prospective franchisees to “do their homework” before buying a franchise.

The additional $1.5 million in funding for the office of the Australian Small Business and Family Enterprise Ombudsman has been earmarked to “help small businesses identify and access support for dispute resolutions”.

In a pre-budget announcement, the Federal Government also said it will allow businesses engaged in debt disputes in the Administrative Appeals Tribunal (AAT) to apply to pause or modify debt recovery actions by the Australian Tax Office, if those actions are linked to the dispute before the AAT.

Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson welcomed Treasurer Frydenberg’s announcement, saying it will provide prospective franchisees with vital information needed prior to entering into a binding franchise agreement.

Billson says the national registry, to be released next year, will require franchisors to lodge disclosure documentation about their franchise annually. These documents will be publicly available through the registry.

He explained “there is a clear need of greater awareness in the franchise sector and this registry will certainly help restore confidence in this sector.

“My office has advocated strongly for the implementation of this registry to improve transparency of franchise operations, so prospective franchisees are properly informed before signing a franchise agreement.

“Over the past six months my office has fielded over 240 calls from franchisees seeking information regarding disputes under Franchising Code of Conduct.

“This demonstrates just how critically important it is for prospective franchisees to know what they are getting into before signing a franchise agreement.

The Franchise Disclosure Registry is scheduled for release in early 2022. There will be a transition period to allow franchising businesses to understand the new requirements before the registry is mandated.

Anyone involved in a franchise dispute under the Code is encouraged to contact ASBFEO for assistance on 1300 650 460 or email info@asbfeo.gov.au

Image: Fitness clubs are among Australia's most successful franchise operations.