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Franchise disclosure update time is about to expire.

The Franchising Code of Conduct requires all franchisors* (including master franchisees) who offer franchises in Australia to update their disclosure document at least once every year. A new disclosure document must be prepared within 4 months of the end of the company’s financial year.
If you are a franchisor with a 30 June year end then the critical date this year is 31 October 2020.

In the flurry of all the changes we have experienced in 2020 please remember that this deadline has not changed.   Your current disclosure document expires on this day. (If you have a different financial year then the expiry date is 4 months from your year end).

Last year I listed the steps to take annually to ensure compliance with the Code:

Hopefully you are well progressed with this, however in summary, the main items that need updating to the disclosure document are:

·       Addition of financial statements or audit for last completed financial year

·       Update of transfers and terminations of franchises in previous financial year

·       Updated list of franchises

·       Any changes in officers, directors or related companies of the franchisor

·       Updates to IP

·       Changes to Operations Manual in the previous year

·       Fresh solvency statement signed by the director/s

*You do not need to update your disclosure document if :

a.     You entered into no more than one franchise agreement in the previous financial year (ending 30 June 2020), and

b.     You do not intend to enter into any more franchise agreements in Australia in the current financial year.

This exception is of very limited application but it will apply for example to any foreign franchisors who have granted a single master franchise for Australia and will therefore expect to have no further franchises to grant in Australia. Even if the exception applies you will later have to update your disclosure document if a franchisee requests a current disclosure document.

While most franchisors only update their disclosure document annually, if there are any significant changes to your business at any time that would mean your existing disclosure document contains false or misleading information then it should be updated at that time to correct that information.

Usually we recommend that any changes you wish to make to your franchise agreement be done at the same time as the update of the disclosure document since these may result in further changes to the disclosure document. But bearing in mind that changes to the Code are likely to occur in 2021 you may prefer to see what eventuates and make appropriate changes then. We do know that some franchisors are however pre-empting the expected changes.

If you require assistance in updating your disclosure document and/or franchise agreement please let me know. If you do not have a new disclosure document ready from 31 October (and this is your expiry date) you will be delayed in granting new franchises after that date.

For further information please contact:

This article is for general information purposes only and does not constitute legal or professional advice.  It should not be used as a substitute for legal advice relating to your particular circumstances.  Please also note that the law may have changed since the date of this article.