In this article we look at some of the important changes to the disclosure obligations of franchisors, arising under the new Franchising Code of Conduct, which came into effect on 1 April 2025 ("the new Code").
Some disclosure obligations apply from 1 April 2025, while other disclosure obligations apply from 1 November 2025.
The new Code still requires a franchisor to provide a prospective franchisee with a disclosure document (which includes additional information), however the requirement to provide a separate Key Facts Sheet has been removed.
The requirement to provide a Key Facts Sheet to a prospective franchisee has been removed. The ACCC has indicated that it no longer requires franchisors to maintain and update a Key Facts Sheet1.
A franchisor must still provide an information statement within 7 days after the prospective franchisee formally applies or expresses an interest in acquiring a franchise business (Section 11).
Prior to 1 November 2025
A franchisor is only required to update its disclosure document to the new form prior to 1 November 2025, if the franchisor will be providing the disclosure document to a franchisee or a prospective franchisee before 1 November 2025.
If the franchisor will not be providing its disclosure document to a franchisee or a prospective franchisee before 1 November 2025, there is no requirement that the franchisor update its disclosure document to the new form before 1 November 2025.
The information required in Item 6(5) has changed. A franchisor must now disclose "the name, location, telephone number and email address of the former franchisee if the information is available" (formerly a franchisor was required to provide the "contact details" of the former franchisee). This requirement is subject to Section 63 of the new Code, which we discuss further below.
The information required in Item 9(2) has changed, with a new Item 9(2)(f) being included, which requires the franchisor to disclose "whether the franchisee could face competition from businesses not associated with the franchisor".
If the disclosure document is updated to the new form, the new mandatory information in relation to significant capital expenditure (Item 14(1A) and Item 14(1B)) does not need to be included prior to 1 November 2025.
In addition, apart from information that relates to marketing funds, the new mandatory information in relation to specific purpose funds (Item 15) does not need to be included prior to 1 November 2025.
From 1 November 2025
From 1 November 2025 all disclosure documents must be updated to the new form, including the changes referred to above.
Further from 1 November 2025 a disclosure document must state whether the franchisor will require the franchisee to undertake significant capital expenditure in relation to the franchised business during the term of the franchise agreement (Item 14(1A)).
In addition, the disclosure document must include as much information as practicable about any such significant capital expenditure including:
(i) the rationale for the expenditure;
(ii) the amount, timing and nature of the expenditure;
(iii) the anticipated outcomes and benefits of the expenditure;
(iv) the expected risks associated with the expenditure (Item 14(1B)).
From 1 November 2025, a disclosure document must also contain information about specific purpose funds. While the information required to be disclosed for specific purpose funds is similar to that previously required for marketing funds, there are a number of changes including the requirement to provide "a copy of the most recently prepared annual financial statement for the fund" (Item 15(g)).
In this article, we refer to the mandatory information required to be included in a disclosure document after 1 November 2025 as the "1 November 2025 information".
Existing franchisees may opt-out of receiving a disclosure document if the franchisee has (or has recently had) another franchise agreement with the franchisor that is the same or substantially the same as the franchise agreement (Section 23(4)(a)) and, the business that is the subject of the franchise agreement is the same or substantially the same as the business that is, or was, the subject of the other franchise agreement (Section 23(4)(b)).
Any written opt-out requests must be kept by the franchisor for at least 6 years (Section 37).
Franchisors must formally notify previous franchisees of their right to have their personal information excluded from disclosure documents (Section 63(1)). A franchisor must allow 14 days for a response from the former franchisee. If the former franchisee does not respond or alternatively, does not give the franchisor a written request that their personal information not be disclosed, the franchisor may disclose the former franchisee's personal information in the disclosure document (after the expiry of the 14 day period).
Any notifications made by the franchisor, and any written responses received by the franchisor must be maintained for at least 6 years (Section 37).
Franchisors can take the following steps to ensure compliance with the new disclosure document provisions:
From 1 April 2025 the removal of the Key Facts Sheet, the first tranche of updated requirements for disclosure documents, and the notification provisions for previous franchisees are elements that require attention.
From 1 November 2025 franchisors must update their documents and processes to align with the new Code, including providing the mandatory Significant Capital Expenditure and Specific Purpose Fund information.
If you are unsure of your new disclosure obligations, we recommend that you see a franchise lawyer to help you understand the 1 April 2025 and the 1 November 2025 requirements.
Disclaimer
The information in this article is general in nature and is not intended to address the circumstances of any person or other entity. Although we do our best to provide timely and accurate information, we do not guarantee that the information in this article is accurate or that it will continue to be accurate in the future.