Franchise disclosure document

  • The disclosure document helps potential franchisees make an informed decision about the franchise.

  • Disclosure documents must be in the same format and have the information in Annexure 1 of the Franchising Code.

  • Certain information must be in the disclosure document. This is the case even if it may discourage a potential franchisee from buying the franchise.

Purpose of the disclosure document

The disclosure document is supposed to help potential franchisees make a reasonably informed decision about the franchise.

The disclosure document must give useful and reliable information about the franchise. It also gives franchisees current information about the franchise that they need for the running of their business.

For more information refer to our guidance publication franchising model disclosure document.

When a disclosure document must be updated

The disclosure document needs to be updated each year. But, to keep franchisees informed, franchisors must do more than update their disclosure document once a year.

Annual update to a disclosure document

Within 4 months after the franchisor’s financial year has ended, the franchisor must update their disclosure document to reflect changes that occurred in the previous 12 months. For example, franchisors whose financial year ends on 30 June have until 31 October that year to update their disclosure document.

Unless a franchisor receives a written request from a franchisee, they are not required to update the disclosure document if they:

  • entered into only one or no franchise agreements during the last financial year
  • don’t intend to enter into a franchise agreement in the upcoming financial year.

Other times when a disclosure document must be updated

Franchisors must update their disclosure document at other times.

  1. Disclosure documents must not contain information that will, or is likely to, mislead or deceive. This means that if a significant change in the franchise system occurs, the franchisor must consider if their disclosure document needs to be updated to reflect this change. This is required even if the annual update is not yet required.
  2. Under the code, certain information called materially relevant facts is considered so important that the franchisor cannot delay telling franchisees and potential franchisees about it. They can't wait until the next time they update the disclosure document.

When a franchisor must give the disclosure document

A franchisor must usually give a potential franchisee a copy of their disclosure document at least 14 days before the franchisee:

If you are thinking about buying a franchise, make sure you have enough time to understand what the disclosure document tells you. Also get independent advice. We explain more about disclosure documents and what they tell you in our online franchising course.

An existing franchisee can ask the franchisor for a copy of the disclosure document once every 12 months.

Required format and information

A disclosure document must be in the same format and contain the information listed in Annexure 1 of the Franchising Code, including:

If a disclosure document contains information about capital expenditure, the franchisor must speak to potential and current franchisees about the capital expenditure. This discussion must happen before entering into, renewing or extending a franchise agreement.

For more information on format, refer to our guidance the franchising model disclosure document.

Current and former franchisee contact details

A disclosure document must include information about the number of existing and former franchisees and contact details for them.

It is important for potential franchisees to speak to current and former franchisees to help inform their decision about whether to buy a franchise.

Current franchisees

The disclosure document must include the number of:

  • existing franchised businesses
  • existing franchisees
  • businesses owned or operated by the franchisor or their associate that are substantially the same as the franchised business.

These must be sorted by state, territory, or region.

The disclosure document must include contact details for each existing franchisee:

  • business address
  • business phone numbers
  • year from which the franchisee started operating the business.

Former franchisees

The disclosure document must include information about franchisees who have ended their franchise. This includes the number of times certain events have happened in the last 3 financial years:

  • the franchise business was transferred
  • the franchised business ceased to operate
  • the franchise agreement terminated by the franchisor
  • the franchise agreement was terminated by the franchisee
  • the franchise agreement was not extended
  • the franchised business was bought back by the franchisor
  • the franchise agreement was terminated and the franchised business was acquired by the franchisor.

The disclosure document must also include the name, location and contact details of each franchisee (if the information is available) whose franchise ended in the last 3 financial years.

A former franchisee can ask for their details not to be disclosed to potential franchisees by writing to the franchisor. A franchisor must not try to influence a franchisee to opt out of including their details in the disclosure document.

Case study

In 2022, Jim’s Group Pty Ltd paid $24,420 in penalties in its capacity as franchisor of the Jim’s Dog Wash franchise. The penalty was paid after the ACCC issued two infringement notices for an alleged contravention of the Franchising Code and an alleged contravention of the Australian Consumer Law. One infringement notice related to an allegation that the disclosure document significantly understated the number of former franchisees within the Dog Wash division and failed to provide the contact details of those former franchisees.

See also

Franchising model disclosure document

Quick guide to a franchise disclosure document

Media release: ACCC finds food franchisors not disclosing critical information

Disclosure practices in food franchising report

 

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