When it comes to your disclosure obligations as franchisor pursuant to the Franchising Code of Conduct, there is no rest for the wicked!

Not only do disclosure documents need to be provided to incoming or prospective franchisees at the start of the franchise relationship, those documents need to be updated and reissued during and throughout the term of the franchise. If you need assistance in updating these documents, get in touch with a franchise lawyer.

Update Disclosure Document

As a franchisor, you are required to update your disclosure document within four months after the end of each financial year, provided you entered into more than one franchise agreement during the last financial year (including transferring, renewing or extending a franchise agreement) and/ or you intend to enter into another agreement in the following financial year. If you are unsure whether or not this franchisor disclosure obligations applies, seek legal advice from one of our specialists.

However, even if you haven’t granted a franchise in the last financial year and have no intention of doing so in the next, if a franchisee requests a disclosure document, you must update the disclosure document so that it reflects the position of the franchise as at the end of the financial year before the financial year in which the request is made. Still confused? Read on for further explanation!

Responding to Franchisee Requests

Franchisees may request, and you must provide, a copy of the disclosure document once every 12 months. This request must be made in writing. Upon receipt of such a written request, the disclosure document must be provided within 14 days.

The form of the disclosure document, insofar as it dictates the information to be disclosed, is mandatory. Anyone who is familiar with these documents would be aware that, particularly for larger franchisors, they take a lot of work to update, so it’s best to plan ahead. Generally, we recommend an end of financial year review for every franchisor as to whether they need to update and, if so, what sections require amendment or addition.

Failure to meet Franchisor Disclosure Obligations

If you fail to provide proper disclosure, or provide false and/ or misleading information in the disclosure document, you could be liable for damages to the franchisee and/or fines issued by the ACCC, so it’s not only important to disclose, but to disclose correctly!

Conclusion

If you are a franchisor and you have a question about your disclosure obligations, or the content of your disclosure document, talk to a franchise lawyer who will be able to guide you through the disclosure process. If you are looking into the possibility of running your own franchise business, or turning your already existing business into a franchise of its own, you will need legal advice on the best way to do this. If you would like a fixed-fee quote, and an obligation-free consultation, our franchise lawyers and Client Care Team would be happy to assist you in this way. get in touch today on 1300 544 755!

Emma Jervis

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