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When looking to start a business, you have the option of building a brand and business model from scratch or joining a franchise network as a franchisee. Purchasing a franchise allows you, as a franchisee, to operate an existing business model with proven success. Before operating a franchise store, you will need to register a business name on the National Business Name Register. This article will discuss the National Business Name Register and whether you have an obligation to register your business name.
What is the National Business Name Register?
The National Business Name Register (the Register) is an online registry that lists all the current registered business names throughout Australia. The Australian Securities and Investments Commission (ASIC) manages the Register.
Difference Between a Company Name and a Business Name
A company is a separate legal entity that you register with ASIC. A company name has to include Pty Ltd or Ltd to indicate the legal structure of that entity. This name will appear on all official and legal documents and can be different from the business name. A company can choose to trade under a name that is different from its company name.
For example, suppose the owner of the franchise is a company called Gelato Visionaries Pty Ltd. In that case, the franchise business cannot be called the Gelato Visonaires Pty Ltd. It must come up with a business name that is different from the franchisor entity name. The franchisee will have to come up with a new business name and register it under the Register.
If the same company owns the business and wants to identify it with a different name, that name must be registered as a business name. For example, if Gelato Visionaries Pty Ltd would like to operate its franchise business under the name of LV Gelato, this must be registered.
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Does a Franchisee Have to Register a Business Name?
As mentioned previously, you will most likely operate under an existing franchise business. So, suppose the franchisor business is called LV Gelato, and you would like to use the same business name. In that case, it will usually go along the lines of LV Gelato – geographical descriptor (such as State, Territory or Suburb). An example of this could be LV Gelato Surry Hills. You will have to notify the ASIC and register this business name.
People tend to go into the franchise network because they believe that there would be less risk than starting their own business by being part of the network. This mainly comes from the fact that existing franchise businesses have a name value that gives a sense of security to franchisees.
Unlike in the past, franchisees no longer need to provide written permission from the franchisor when registering their business name to ASIC. However, it is important to remember that the franchisor will own the trademark of the business name. The franchisees are only being granted the right to trade under the name by virtue of the franchise agreement.
The franchise agreement will also include information about this trademark and will require franchisees to register the business name. This is why it is essential to review your franchise documents with a franchise lawyer before signing them.
Does the Franchisor Have Any Responsibilities or Risks?
Franchisors must correctly register their business name and file for a registered trade mark over that business name. It is also essential that you check the Register on behalf of existing franchisees. This will help franchisors keep track of and notify franchisees if they have not correctly registered their business name.
By failing to properly register your business name and trade mark, others can take advantage of your name or similar versions of your name. For instance, another business could utilise your brand’s goodwill by creating a business name and simply adding geographical differentiators after the name. This will confuse consumers and affect the branding of well-known franchisors. Accordingly, it is essential for you to register your business name and the relevant trade mark. Franchisors must also continuously check that only their franchisees are using the franchise business name and trade mark.
It is best practice to conduct an audit of all existing registered business names to ensure that the Register does not include any past franchisees or irrelevant businesses that utilise your franchise brand. It is also essential to make sure that the franchise agreement includes a clause giving you the right to cancel the registration of a business name once the franchise agreement terminates or expires.
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Key Takeaways
Franchisors must actively check the National Business Name Register for any unsanctioned use of their franchise branding. Likewise, remove ex-franchisee’s business names from the Register. On the other hand, for franchisees joining the franchise network, it is important to register your business name with ASIC before you start operating.
If you are a franchisor or franchisee requiring guidance, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
The National Business Name Register is a centralised register containing the names of all the operating businesses in Australia.
You need to already have an Australian Business Number (ABN), or be in the process of getting this number. Once you have the ABN, you can register your business name online through the ASIC website.
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