Disclosure Document
Franchisors must update their disclosure document within four months following the end of each
financial year, to incorporate any changes that have taken place in that previous financial year.
For instance, if the franchisor’s financial year concludes on 30 June 2023, they have until 31 October
of that same year to update their disclosure document.
Your Disclosure Document Updates should include but are not limited to the following:
- Associates details (Item 2), along with details of their relationship to the
franchisor - Information regarding any litigation and percentage of franchisees in dispute last
financial year (Item 4). - Number of existing franchisees and franchised businesses, including their addresses,
telephone numbers, and the year of commencement for each franchisee
(Items 6.1 to 6.3). - Key events for the past three financial years (2020, 2021, and 2022), including
franchise transfers, ceased operations of franchised businesses (Item 6.4). - Unless franchisees have requested non-disclosure, the disclosure must provide the
name, location, and contact details of franchisees involved in the aforementioned
key events (Item 6.5). - Intellectual property changes (Item 8).
- Supply arrangements –including percentage of rebates / financial incentives
received per supplier as a single aggregate percentage of total group purchases per
supplier (not including franchisor businesses) (Item 10) - Payments, including those made to third parties (Item 14).
- Marketing or cooperative fund expenditure for the previous financial year (Item 15).
- Unilateral variations made to existing franchise agreements within the past three
financial years (Item 17). - Consideration of significant capital expenditure by franchisees when determining
end-of-agreement arrangements in the last three financial years (Item 18.2). - If earnings information is provided, this must be reflected in the disclosure
document (Item 20) - Updated signed solvency statement for the franchisor supported by financial reports
– either last year’s financial audit report / 2 last financial years’ financial reports
prepared in accordance with sections 295 – 297 of the Corporations Act.
The information should be presented in a clear and organised manner within the disclosure
document.
Key Facts Sheet
The key facts sheet acts as a summary of the disclosure document and provides only a simplified
representation of what is contained in the disclosure document. In general, the key facts sheet is
updated when the disclosure document is updated. Although some parts may be specific to individual
transactions.
Note: use the new format of the Key Facts Sheet on the ACCC website: Franchising Key Facts Sheet
(accc.gov.au).
Marketing Fund
If your franchisees make contributions to a marketing fund, the fund administrator, who can be the
franchisor, master franchisor, or authorised Associate, must prepare an annual financial statement
for the fund. The identity of the fund administrator should be disclosed in the disclosure document.
The marketing fund financial statement, along with an auditor’s report if required (please note that
this is not required if 75% of franchisees vote against the audit within 3 months after the end of the
financial year), must be prepared within four months after the financial year’s end. Subsequently, the
fund administrator must provide a copy of the statement to franchisees within 30 days of its
preparation.
If an auditor’s report has been prepared, it must be provided to franchisees within 30 days of the fund
administrator’s receipt of the report.
The marketing fund statement must include sufficient detail about the income and expenses to give
meaningful information to franchisees.
Disclosure Register Update
As per the Franchising Code of Conduct, Franchisors must establish a franchise profile on the
Register. Franchisors are obligated to keep their profiles and disclosure information up to date on
the Register within 14 days following their annual requirement to update their Disclosure Document.
However, if you update your disclosure document early, the information on the Register should
reflect the same.
BDC Law Tip
At BDC Law we encourage franchisors to organise the franchisor’s financial reports and marketing reports as soon as possible otherwise they could delay franchisors meeting their other timeframes under the Code.
