Well, it’s that time of year again! If you’re a franchisor, it’s time to update your disclosure documents. You’ll need to have finished this within 4 months of the end of your financial year. This includes preparation of financial reports for the financial year. For franchisors whose financial year ends on 30 June, you have until 31 October to finalise your reports and disclosure documents.
Updating your documents is an important part of running a franchise system and is mandatory under the Franchising Code of Conduct (the Code).
What does the annual update entail?
When carrying out their annual update, franchisors should consider the following details:
1. Financial details
These must be prepared either in accordance with sections 295 to 297 of the Corporations Act 2001 or by an independent auditor. Your disclosure document must include financial reports for the last 2 financial years. The franchisor must also sign a statement confirming their solvency and ability to pay its debts.
2. A list of current franchisees.
Have there been any new franchisees, sales of existing businesses, terminations of franchise agreements, or franchisees whose operations have ceased?
3. Financial information and payments required under Franchise Agreements.
Have there been any fee increases? For example, in some franchise systems fees increase annually in line with CPI increases.
4. Changes to the intellectual property
Has the franchisor rebranded, introduced a new logo or registered any new trade marks?
5. Major capital expenditure required by franchisee.
Does the Disclosure Document sufficiently cover everything, for example the expenses involved in a store upgrade? An ...