Friday, 23 December 2016

Franchise Disclosure Documents



Disclosure Document | Franchising | Code compliance

The purpose of disclosure is to give to a prospective Franchisee entering into a Franchise Agreement (or an existing Franchisee proposing to renew or extend their Franchise Agreement), information to assist the Franchisee to make a reasonably informed decision about the franchise system and the franchised business.

The Code prescribes that a Franchisor must give a current Disclosure Document to:
  • a prospective Franchisee at least 14 days before the prospective franchisee enters into the Franchise Agreement or pays a non-refundable payment;
  • a Franchisee renewing or extending their franchise, at least 14 days before the renewal or extension is effective.
The Disclosure Document must be prepared and contain the information prescribed by the Code.

The Franchisor must also update its Disclosure Document on an annual basis and provide this to the Franchisee within 4 months after the end of each financial year.

A Franchisee can request a copy of the current Disclosure Document, although only one request is permitted in any 12 month period.

The Code provides that where there are “materially relevant facts” which come into existence after a previous disclosure period, then the Franchisor must inform the Franchisee in writing, within a reasonable time not exceeding 14 days after the Franchisor becomes aware of the fact or matter. Eg. a change in the majority ownership or control of the Franchisor.

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