Reminder to Franchisors to Update Their Disclosure Document. You have until 31 October!

Avoid financial penalties, update your disclosure document now! We suggest you start working on this task now, even if your current year financials are not yet finalised. If you act now you can also avoid spending money on auditing your marketing fund (see how below). Background: As a franchisor, the Franchising Code of Conduct (“Code”) requires you to update your Disclosure Document at least once a year – within 4 months of the end of each financial year. This means that for most Australian based franchisors, you must complete your update between 1 July and 31 October of each year. After this date you cannot issue any new franchises until the updates are complete! Always remember – franchisors cannot recruit franchisees without an up–to-date “current” Disclosure Document. It is therefore crucial to ensure that your Disclosure Document complies with the Code’s requirements. The yearly update requires you to provide: 1. An updated Disclosure Document in the prescribed format (with new and/or updated information relating to all likely costs and expenses that may be incurred by franchisees, as well as information relating to changes within the franchise network, including any disputes that have occurred). 2. The franchisor’s financial statements for the last two completed financial years, or alternatively, an audit report from an independent auditor stating that the franchisor is solvent as of 30 June of the current year; and 3. An annual financial statement detailing all of the Marketing Fund’s receipts and expenses for the last financial year (Marketing Fund Statement). Additionally, the Code requires franchisors to: 1. Arrange for the Marketing Fund Statement to be audited by a registered company auditor within 4 months after the end of the financial year (between 1 July and 31 October) to which it relates; and 2. Provide to their franchisees a copy of the Marketing Fund Statement, within 30 days of preparing it; and a copy of the audited report of the Marketing Fund Statement, within 30 days of preparing the report, unless 75% of your Australian franchisees who contribute to the particular fund vote to agree that an audit is not required. NOTE - the vote must be held by 30 September, and by virtue of the Code, the vote is required to be conducted annually. If the franchisees vote that your fund does not require an audit, there is no need to obtain an audit report for that financial year. Contact Rostom Manookian on 0416 716 960 or email rostom@manookiansolicitors.com to discuss updating your Disclosure Documents or other franchise related matters. We offer fixed fee services to ensure transparency and certainty to meet your requirements. We provide legal services in franchising, business, property, conveyancing, leasing, intellectual property, and other commercial related contractual and transactional matters.