Franchise Disclosure Document
If you are an Australian franchisor, you are required to create and maintain a disclosure document.
A franchise disclosure document is prescriptive and needs to contain the information required under the Franchising Code of Conduct (the Franchising Code). This information includes:
THE FRANCHISOR'S DETAILS AND BUSINESS EXPERIENCE
The franchisor must provide details of the business including the franchisor's business experience, business names and business associates. The franchisor must also provide a statement that the franchise business is solvent.
LITIGATION
The franchisor must provide details of any current and past litigation. The relevant litigation is generally matters involving fraud, unconscionable conduct, misrepresentation and any breach of a franchise agreement.
EXISTING FRANCHISEES
The franchise disclosure document must contain details of all existing franchisees. This allows a potential franchisee to contact an existing franchisee to ask any questions that they may have about owning and operating a franchise business.
INTELLECTUAL PROPERTY
The franchisor must describe and list the intellectual property of the franchisor and outline the conditions which restrict the use of the intellectual property by franchisees. The franchisor must also provide details of any licence agreement which affects the use of the intellectual property.
TERRITORY
The franchisor must provide a prospective franchisee with a history of the site or territory in which the prospective franchisee proposes to operate the franchise business.
GOODS AND SERVICES
The franchise disclosure document must contain information about the conditions which will be imposed on the franchisee in relation to the purchase and supply of goods and services. For example a franchisee may only be able to purchase goods from the franchisor or approved suppliers.
FEES AND PAYMENTS
The franchise disclosure document must contain details about any payments which are to be made to the franchisor (including up front and ongoing fees).
The franchise disclosure document must also contain details of any ongoing payments which are to be made to third parties.
Preparation of a Franchise Disclosure Document
The contents of the disclosure document are relied on by franchisees when entering into a franchise agreement. Consequently the disclosure document must be carefully prepared.
In addition a franchisor's disclosure document is required to be updated annually.
The preparation of a franchisor's initial disclosure document is included in our franchise packages.
We also conduct annual updates of a franchisor's disclosure document for a fixed fee.
