6 Provisions of Franchise Documents that Require Updating

In Short

• Franchisors must update their Disclosure Documents by the end of October each year to comply with the Franchising Code of Conduct.
• Key updates include company structure, intellectual property, franchisee lists, expenses, and financial disclosures.
• Keeping the Disclosure Document up to date ensures compliance, transparency, and readiness for potential franchisees.

Tips for Businesses

Start reviewing your Disclosure Document early to avoid last-minute compliance issues. Focus on financial updates, operational changes, and franchisee details. If you’re unsure about any updates, seek legal advice to ensure accuracy. An up-to-date document not only keeps you compliant but also builds trust with potential franchisees.

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Table of Contents

• When Are You Not Required to Update the Disclosure Document?
• 1. Company Structure/List of Associates 
• 2. Intellectual Property 
• 3. Rebates 
• 4. List of Franchisees
• 5. Expenses 
• 6. Annexures 
• Key Takeaways
• Frequently Asked Questions

Under the Franchising Code of Conduct (the Code), franchisors have an obligation to update their Disclosure Documents within four months after the end of each financial year (being the end of October). If you are a franchisor who has not yet commenced updating your Disclosure Document, it is time to start making those updates! This article will explain what aspects of your Disclosure Document need to be updated in accordance with the Code. 

Franchisor Financial Disclosure Factsheet

This factsheet sets out the three key financial disclosure obligations every franchisor needs to comply with.

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When Are You Not Required to Update the Disclosure Document?

There is one circumstance where your Disclosure Document may not need to be updated. 

An update may not be required if:

• you did not enter into more than one franchise in the last financial year (this includes transferring, renewing, or extending a franchise agreement); and
• you do not intend to enter another franchise in the following financial year.

If your situation is not captured by the above circumstance, then you will need to update your Disclosure Document. 

It is good practice for all franchisors to update their Disclosure Document annually so that it:

• contains current information; and
• is prepared to be issued to prospective franchisees if they inquire about the network.

The common provisions requiring updates in the Disclosure Document are outlined below. 

1. Company Structure/List of Associates 

Operational changes will need to be updated in your Disclosure Document. This includes, for example:

• adding another entity to the group or undertaking a restructure; and
• any directors joining or leaving the group.

2. Intellectual Property 

The annual disclosure updates are an excellent opportunity to review the status of your intellectual property registrations. If any changes have occurred, including any additions, you must include this in your update. 

3. Rebates 

Consider whether the rebates you earn have changed this year. If there have been changes, you must ensure your Disclosure Document accurately reflects the current status of the rebates. This is especially important if you require franchisees to purchase goods from a specific supplier.

4. List of Franchisees

The Disclosure Document requires that you provide an itemisation of the franchisees and franchised businesses within your network for each State and Territory. Further, you must note any:

• transfers; 
• assignments; 
• non-renewals; or 
• terminations that have occurred. 

5. Expenses 

The Disclosure Document requires that you provide a detailed, itemised list of the set-up and operating costs of the franchised business. When updating your Disclosure Document, you should review and update these costs to ensure they are up-to-date and accurate.

6. Annexures 

As a franchisor, you will have specific disclosure requirements related to your financial position. In particular, you will need to either annex:

• financial statements for the last two financial years; or
• a report from a registered auditor on the franchisor entity’s solvency. 

In any case, both options can take some time and planning. The process should be commenced well before the end of October. 

In addition to providing financial statements or auditor’s reports, franchisors also have an obligation to provide a marketing fund report if they operate a marketing fund. This report should provide a breakdown of the following:

• income details: contributions made by franchisees;
• expenditure details: advertising and promotional activities; and
• breakdown by category of where the funds are allocated and what form of marketing is utilised.

Key Takeaways

The above provisions are some key sections that need to be updated. You should consider any other aspect of your Disclosure Document that requires updating for its ongoing accuracy.

If you need assistance ensuring your Disclosure Document is up to date before the deadline, our experienced franchise lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page. 

Frequently Asked Questions