Originally Published 7th October 2008

Franchisors should keep in mind that they are required to update their disclosure documents by 31 October 2008. The updated document must comply with the amendments made to the Code on 1 March 2008 and must contain information for the financial year ending 30 June 2008.

Preparation of annual financial statement for marketing fund to be completed by 31 October 2008

The amendments to the Code introduced a requirement that franchisors prepare an annual financial statement detailing the receipts and expenses of any marketing or other cooperative fund by 31 October each year. This statement must be given to franchisees (regardless of whether they ask for it) within 30 days of it being prepared.

If your franchise system is required to have its financial statement audited, then a copy of the auditors report, which must be prepared by 31 October each year, must be given to franchisees (regardless of whether they ask for it) within 30 days of it being prepared.

Parliamentary Committee Inquiry

In June 2008 the Parliamentary Joint Committee on Corporations and Financial Services announced that it too would conduct an inquiry to identify improvements to the Code with particular reference to:

  • the nature of the franchising industry and the rights of franchisors and franchisees
  • whether an obligation for franchisors, franchisees and prospective franchisees to act in good faith should be explicitly incorporated into the Code
  • the interaction between the Code and particular parts of the Trade Practices Act
  • the operation of the dispute resolution provisions under the Code
  • related matters.

The Committee is due to release its report in December 2008.

Changes to the Code

Most franchisors are aware of the impact of the changes to the Code, which came into effect on 1 March 2008. The ACCC has provided further guidance in relation to the disclosure process, and in particular what kinds of changes can be made to the franchise agreement without the need for disclosure to be repeated.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.