This month’s Quick Tips for Franchisors relates to the disclosure document. All franchisors know that they must prepare and maintain a current disclosure document, but here are some points that are sometimes overlooked:
- Make sure that your disclosure document includes the amendments to the Code that came into effect on 1 March 2008. We still see disclosure documents that do not comply with the March 2008 amendments.
- Regularly review and update your disclosure document. Incomplete, out-of-date or incorrect information could be used by an aggrieved franchisee to support a case for precontractual misleading or deceptive conduct. In particular, carefully check Item 13 (Payments) and ensure that it discloses sufficient detail for all franchisee establishment costs and payments. Franchisees rely on this information.
- If the franchise territory or site was previously franchised, then a separate document must be attached to the disclosure document that provides certain details for that franchised business, including the circumstances in which the previous franchisee ceased to operate. There is no time limitation on this requirement! The ACCC has indicated to us that this information must be provided even if the previous franchisee ceased to operate more than 3 years ago.
- The first page of the disclosure document can be signed by a director, officer or authorised agent of the franchisor. However, the financial details statement required under item 20 can only be given by a director of the franchisor. No other person can give or sign the financial details statement.
- Remember, you need to provide a disclosure document where there is a new franchise, a renewal of an existing franchise or the extension of an existing franchise.