Your Disclosure Documents need to be updated by:

Forget to update your disclosure documents at your peril.

Franchisors must update their disclosure documents within 4 months of the end of their financial year. That means that most franchisors who operate on a standard financial year ending on 30 June must finalise their update by 31 October.

The annual update is an important part of running a franchise system and is mandatory under the Franchising Code of Conduct. It should never be overlooked lightly.

What does the annual update involve?

You should consider the following:

1. Financial reports for the previous 2 financial years must be prepared in accordance with the Code's guidelines. The disclosure document must include copies of these reports or an independent audit report of them.
2. All details within your disclosure document should be up-to-date, including:

• The list of current franchisees. Have there been any new franchisees, sales of existing businesses, franchise agreements which have terminated or franchisees who have ceased to operate?
• The list of franchisees who have left the system within the last 3 financial years, including a contact email and/or phone number.
• If you operate a marketing or advertising fund, then details of the fund's expenses for the last financial year.
• Financial information and payments required under the franchise agreement. Have there been any fee increases?
• Changes to the intellectual property. Have you rebranded, introduced a new logo or registered any new trade marks?
• Major capital expenditure expected to be incurred by franchisees. Does your disclosure document sufficiently cover everything, for example, the expenses involved in a store upgrade? An upgrade can include a lot of different things including new software and point of sale systems, signage, furniture and ...

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"Take it or leave it" is the traditional response given to a prospective franchisee asking to negotiate a franchise agreement. Whilst franchisors may sometimes agree to special conditions such as reduced fees or other concessions while the franchisee establishes their customer base, franchisors generally don't negotiate the key provisions of a franchise agreement.

Despite tradition, franchisors should always carefully consider a request to negotiate an agreement.

Are you in a position to say no?

Franchisors of new systems may see negotiating as a quicker way to grow their franchisee numbers. However, being too eager to negotiate or too willing to part with your brand standards could devalue your system in the long run.

Generally, the older and larger the franchise system, the more reluctant a franchisor will be to negotiate. The franchisor's template franchise agreement will often be tried and tested, and in the franchisor's opinion, strikes a reasonable balance between the interests of franchisee and franchisor.

Franchisors of established systems don't need to negotiate their agreements in order to grow their system. If a prospective franchisee is unsuccessful at negotiating and decides not to proceed, there will usually be someone else willing to take the same franchise agreement as-is. This is not to say that franchisors shouldn't negotiate if a franchisee raises a valid request.

Some reasonable requests may include changing the term of the franchise agreement to match the term of the franchisee's lease or granting the franchisee the first right of refusal to buy a neighbouring territory. What's reasonable will always depend on the circumstances.

Be mindful of promises and representations you make to prospective franchisees. If you have previously promised something, then it may be unreasonable for you to then refuse to reflect that promise within the franchise agreement. ...

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