Key Takeaway Points
- Failure to update disclosure documents or upload or confirm information to the Register can attract hefty penalties so please get in touch with our team if you need specific advice.
- Franchisors are required to update their disclosure document and key facts sheet annually under the Franchising Code of Conduct (Code).
- The annual update of disclosure documents must be finalised 31 October 2024.
- Franchisors must also confirm or update this key information on the Franchise Disclosure Register (Register) on or before 14 November 2024.
Annual update of your disclosure document
Franchisors are required to update their franchise disclosure document and key facts sheet within 4 months from the end of their financial year. Franchisors whose financial year ends 30 June have until 31 October 2024 to complete their update.
Important items of the Disclosure Document to review and update include:
- changes to officers or associates of the franchisor;
- changes to intellectual property;
- details of any litigation commenced or finished;
- fees, costs and expenses payable by franchisees;
- details of franchisees who have left or joined the franchise system in the last 3 years; and
- financial details including a statement of solvency by the franchisor’s director/s.
Marketing funds
If franchisees contribute to a marketing fund, franchisors must also prepare a financial statement for all income and expenses paid out of the fund for the past financial year.
The statement must be audited by a registered company auditor unless 75% of franchisees have voted not to comply with this requirement within 3 months of the end of the financial year.
The statement and auditor’s report must be prepared within 4 months of the end of the financial year and franchisees must be given a copy of the statement and auditor’s report within thirty 30 days of its preparation.
Franchise Disclosure Register
By no later than 14 November 2024, franchisors must update the information from their annual disclosure document onto their Register within 14 days of their annual disclosure document update:
- the franchisor’s registered address and principal place of business in Australia;
- basic information about the franchise system: eg how long the franchisor operated for, the number of franchisees, use of suppliers, information about payments and costs, the term of the agreement, options to renew and any restraint of trade provisions;
- the franchisor’s business telephone number and email address; and
- the “ANZSIC” division and subdivision codes for the industry in which the franchise operates.
Each year franchisors must update or confirm the information from their annual disclosure document onto the Register within 14 days of their annual disclosure document update.
Penalties
Failure to update a disclosure document can attract penalties of up to $187,800. However, failure to disclose financial information or other materially relevant matters (such as any change in majority ownership, criminal proceedings, judgements or change in intellectual property) can attract a penalty which is the greater of:
- $10,000,000;
- three times the commercial benefit achieved from the non-compliant behaviour; or
- 10% of the franchisor’s gross annual turnover.
Failure to upload or confirm information to the Register by 14 November 2024 may also incur civil penalties of up to $187,800.
Key dates
Franchisors are advised to record the following key dates to ensure compliance with the Code and avoid potential penalties:
- update franchise disclosure documents and key facts sheet by 31 October 2024;
- confirm or update the information to the Franchise Disclosure Register on or before 14 November 2024.
If you require a review of your franchise documents or would like to obtain specific advice on the Register, please contact our Franchising experts.
