Franchisors with more than one franchisee, must update their disclosure document between 1 July and 31 October each year.
Assuming that the franchise system and franchise agreement itself have not changed, the update is generally limited to the following sections:
- preparation date (item 1.1(d))
- number of years operating in Australia (item 2.4)
- details of changes in franchise ownership in the last financial year (item 6.4)
- marketing fund expenses from the last financial year (item 15.1(g))
- date of solvency statement (item 21.1)
- Confirmation that the existing content has not changed over the previous year:
- company/associates details and experience (items 1.1(b), 2 and 3)
- whether any litigation or insolvency proceedings have occurred in the last year or with respect to any new directors (item 4)
- whether the use (or lack of us) of agents has changed (item 5)
- whether intellectual property has been added or dropped from the portfolio (item 8.1)
- whether there are any additional suppliers that provide a financial benefit or rebate (item 10.1(j))
- whether the payments franchisees should expect to make need to be updated (item 14)
- whether any unilateral changes have been made (item 17)
- whether capital expenditure has been taken into account in the last year (item 18.2)
- whether any earnings information provided has changed (item 20)
- Updated franchisee information:
- numbers of and details of existing franchisees (item 6)
- Updated financial information:
- financial reports and/or statements/certificates (depending on the option used by the franchisor) (item 21)
- payments generally (item 14)
- marketing fund expenses from the last financial year (item 15.1(g)).
In 2016 it is particularly important that franchisors pay attention to ensure that the disclosure document accurately and transparently discloses arrangements which apply at the end of term, renewal and unilateral changes. The particular importance with respect to these issues arises from the application of the unfair terms legislation from 16 November 2016.
Franchisors should also turn their mind to the preparation and (if required) audit of financial reports of any cooperative or marketing funds in accordance with the Code. Financial reports need to be prepared and (if required) audited within four months after the end of the last financial year (usually 31 October). Financial reports must be provided to franchisees within 30 days of preparation and audit reports (where prepared) provided within 30 days of preparation.
There are significant penalties for non-compliance with the Code.