A recent amendment to the Franchising Code of Conduct introduces new privacy obligations for franchisors at the end of a franchise relationship. Under Section 63, franchisors must take additional steps before disclosing a former franchisee’s personal information to prospective franchisees. Failure to comply carries significant penalties, making it crucial for franchisors to update their processes accordingly.
Key Requirements of Section 63
- Notice Requirement: At least 14 days before disclosing any personal information, the franchisor must inform the former franchisee in writing of their right to request that their personal information not be disclosed.
- Right to Opt-Out: Former franchisees can submit a written request instructing the franchisor not to share their personal information with prospective franchisees.
- No Undue Influence: Franchisors must not attempt to influence a former franchisee’s decision to allow or prevent disclosure of their personal information.
Practical Steps for Franchisors
To ensure compliance and avoid penalties, franchisors should take the following steps:
1. Update Franchisee Exit Processes
- Develop a standardized written notice to be sent to former franchisees within the required timeframe. This could be included in a standard form deed, end of franchise checklist, or be a standard alone.
- Maintain records of when notices are sent to former franchisees and any responses received.
- Practically speaking, where this information is contained in the disclosure document, the new financial year, when most franchisors update their DD, provides the perfect opportunity to check all notices have been sent and audit compliance with s63.
2. Review and Modify Disclosure Practices
- Ensure that disclosure documents and prospectus materials do not include personal information of former franchisees who have opted out.
- Train relevant staff on these new obligations to avoid inadvertent breaches.
3. Implement a Tracking System
- Maintain a secure database of former franchisees and their disclosure preferences.
- Automate reminders to send notices and log responses.
4. Avoid Non-Compliance Risks
- Ensure that all communications with former franchisees regarding this provision are neutral and factual.
- Establish internal controls to prevent unauthorized disclosures.
Consequences of Non-Compliance
Breaches of Section 63 can result in civil penalties of up to 600 penalty units per offence. Given the substantial financial impact of non-compliance, franchisors must act swiftly to integrate these requirements into their franchise management systems.
Conclusion
This new provision reinforces the importance of respecting former franchisees’ privacy and consent regarding information disclosure. By proactively updating processes and training staff, franchisors can ensure compliance while maintaining transparency with prospective franchisees. Now is the time to review and refine exit procedures to align with these new legal obligations.