Under the Franchising Code of Conduct (the Code) franchisors must update, within set time frames each year, the information within:
Their Disclosure Document (DD);
Their Key Facts Sheet (KFS); and
The Franchise Disclosure Register (FDR).
As explained below, for Australian franchisors operating with a 30 June end of financial year, these annual deadlines are fast approaching.
Updates to DD
The Code requires that franchisors must update and sign off their DD’s annually within four months after the end of each financial year.
The deadline for franchisors is therefore 31 October.
The updates must reflect changes to the franchise that occurred in the previous 12 months, so that new and existing franchisees receive current information about the network, including details of franchisees, system changes etc.
The previous financial year’s financial statement must also be signed off and included, as well as audited financial statements for the marketing fund (if applicable).
Updates to KFS
The KFS is intended to highlight key information in the DD.
Under the Code franchisors must update the KFS annually within four months after the end of each financial year. For franchisors the deadline to update the KFS is therefore also 31 October.
The KFS must be in the form published on the ACCC’s website, and include the information required by the form consistent with the DD. It makes practical sense therefore for franchisors to update the information in the DD and the KFS at the same time.
Exceptions to obligations
Franchisors are not required to update their DD and KFS if they:
entered into only one or no franchise agreements during the last financial year, and
don’t intend to enter into a franchise agreement in the upcoming financial year.
However, if a franchisor receives a written request from an existing franchisee for a copy of the DD, they must update the KFS so that it reflects the position of the franchise as at the end of the most recent financial year. This applies even if they don’t intend to enter into a franchise agreement in the upcoming financial year.
Updates to FDR
As of last year, all franchisors must lodge certain mandatory information on the FDR.
Under the Code the information on the Register must be updated or confirmed at least once for each financial year, on or before the 14th day of the fifth month following the end of the previous financial year.
For franchisors the deadline to update this information is therefore 14 November.
Consequences for failing to comply
Franchisors who fail to comply with the obligations to update information in the DD, KFS and the FDR can face financial penalties under the Code and additionally the risk of brand damage if the failures are made public.
It is important for franchisors to allow sufficient time for their lawyers to review the information and ensure it is complete, correct and meets the requirements of the Code.
For assistance with updating your DD, KFS and publishing on the FDS, please contact our franchising team.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.