If you’re a franchisor, and have not yet updated your franchise documents to accord with the updated Franchising Code of Conduct, it’s time to get cracking!
Changes in Franchise Documents
In accordance with the newly revamped Code, and pursuant to its transitional provisions, Franchisors can continue to use disclosure documents in accordance with the existing Code up to 31 October 2015, but after this date they must be in accordance with the new Code.
This doesn’t just apply to the new form of disclosure document, which forms a schedule to the Code. There are also provisions in that the Franchise Agreements that may need to be updated to comply with updated law with respect to territories, renewals and good faith (which, then, will necessitate further changes to the disclosure document).
A disclosure document must also still include copies of financial reports for the past 2 financial years, unless an independent audit statement is provided within 4 months of the end of the financial year for that statement’s financial year (under the old Code the requirement was to provide the statement within 12 months), so if you’re looking to update your documents, you should start soon to ensure the necessary reports are prepared.
It’s important to note the ACCC may issue an infringement notices for an alleged contravention to certain sections in the Competition and Consumer Act, which the Code forms part of. The penalty imposed with an infringement notice is not discretionary and will be $8,500 for each infringement, meaning if you’re issued with a penalty notice, you’re liable. This potential penalty should provide great motivation to have your standard agreements reviewed in light of applicable legislation.
At LegalVision, we have undertaken the task of updating numerous existing franchise documents to comply with the new Code, and are seeing on every occasion contractual provisions that do not accord with the new Code, or other applicable laws. Further, its worthwhile undertaking a review of your franchising documents in light of the newly introduced obligation of Good Faith, and making appropriate amendments. If you require an experienced franchise lawyer to review and update your documents, get in touch.
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