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:
- 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.
- 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 ...