If you’re a franchisor, your Franchise Disclosure Document needs to be updated at least annually – and ensuring it’s done properly is essential to meet your compliance obligations under Australia’s Franchising Code of Conduct.
As a Franchisor, you must provide a Franchise Disclosure Document to anyone considering becoming a franchisee of your business at least two weeks before a non-refundable payment is made by a franchisee, or a franchise agreement is entered into.
This document must then be reviewed and the information contained in it must be made current each year. This is to ensure your franchisees have the latest information about the franchise and how it is tracking to support the successful operation of their business.
You could be up for penalties if you don’t submit this refreshed document by October 31 each year.
Preparing for your annual Franchise Disclosure Document update
Updating a Franchise Disclosure Document should not be left until the last minute to ensure franchisors meet the deadline.
It’s best to start updating your Franchising Disclosure Document at the start of the new financial year. This timeframe will allow your business to carefully work through all the requirements and ensure the update is done to the expected standard.
It will also provide enough time for your accountants and legal team to complete all necessary tasks.
What does a Franchise Disclosure Document update include?
The requirement to update a Franchise Disclosure Document annually is to ensure the information in the document is accurate.
As part of the Franchise Disclosure Document update, a statement of solvency as well as financial statements for the previous two years must be supplied. Alternatively, you can have your financial reports audited, and provide an independent audit report along with the statement of solvency.
Some other key areas that may need to be brought up to date include, but are not limited to:
Information on the franchisor, company officers and associated entities
If any franchises have changed ownership or been terminated
Marketing fund financial statement
Any legal proceedings underway against the franchise or company directors
Details regarding suppliers
Franchisee payment costs and fees
Contact detail changes
Franchise Disclosure Document update assistance
At Quest Legal, we are experts in franchising law.
We represent a number of highly regarded franchise operators and possess deep knowledge of the sector.
We’ve acted on behalf of franchises covering industries from retail to restaurants, transport, printing and health and wellness – and our lawyers are experienced in all stages of franchising, including:
Establishing and structuring new franchises
Preparing franchise agreements
Preparing disclosure documents
Developing operations manuals
Franchising can be a powerful way for business owners to quickly expand their corporate presence, but it is also one of the most regulated legal areas in Australia, meaning getting it wrong can be costly. Getting it right is easier with expert legal advice customised for your business, so contact us today and we’ll be happy to provide an obligation-free consultation and quote.
You can also download Quest Legal’s helpful Franchisor Annual Compliance Checklist here.