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About marketing funds
A marketing fund often pays for the marketing and advertising of the franchise network. Franchisees must contribute to the fund by paying marketing fees, and this money must be kept in a dedicated or separate account.
Unless it says so in the franchise agreement, franchisees usually don’t get a say on how marketing money is spent. This is a decision for the franchisor.
Franchisors or their fund administrators who operate the marketing fund must follow rules in the Franchising Code of Conduct about:
- how the money can be used
- who pays into the fund
- telling franchisees about how the money was collected and spent every financial year.
The franchising disclosure document must include details about the franchise's marketing fund, such as:
- who controls or administers the fund
- who contributes to the fund
- how much the franchisee must contribute to the fund and whether some franchisees contribute at a different rate
- the kind of expenses for which the fund can be used
- what last year’s fund was spent on, including the percentage spent on production, marketing, administration and other stated expenses
- if the fund is audited and, if so, by whom and when
- if the franchisor, master franchisor or an associate supplies the goods or services that the fund pays for
- if the franchisor or master franchisor must spend part of the fund on marketing or promoting the business.
How marketing funds can be used
A marketing fund can only be used to pay for:
- costs that the franchisor has told franchisees about in the disclosure document
- legitimate marketing expenses
- expenses that a majority of franchisees contributing to the fund have agreed to pay
- the reasonable costs of administering or auditing the marketing fund.
Who pays into the fund
The disclosure document must say who contributes to the fund.
If the franchisor or master franchisor operates a franchised business, they have to contribute to the marketing fund like their franchisees.
The disclosure document must also say how much a franchisee must contribute to the fund, and if other franchisees’ contribution is different from what they must pay.
Marketing fund statements
If franchisees contribute to a marketing or other cooperative fund, the fund administrator must prepare an annual marketing fund financial statement, and give this statement to franchisees.
The fund administrator is the franchisor or master franchisor that controls the marketing fund, or a person they authorise to administer the fund. The disclosure document lists who the fund administrator is.
A statement must be given to franchisees each year
The marketing fund financial statement and, if required, an auditor’s report, must be prepared within 4 months of the end of your financial year.
The fund administrators must then give a copy of the statement to the franchisees that contribute to the fund, within 30 days of the statement’s preparation.
If an auditor’s report has been prepared, this must be provided to franchisees within 30 days of the fund administrator receiving the report.
The statement must provide meaningful information
The marketing fund statement must:
- make sense to an ordinary reader, and not just an accounting professional
- include enough detail to give franchisees meaningful information about the fund’s income and expenses.
Meaningful information allows franchisees to understand, just by reading the statement, how, when, and on what the money from the fund was spent.
The information in the statement should allow franchisees to make an informed assessment whether the use of the fund was appropriate. For example, ‘50% spend’ under a line item of ‘Advertising – Television’ in a statement is unlikely to provide enough detail. More information is needed, such as which television channels the advertising appeared on and when.
Different items or categories of expenditure may require different levels of detail. Generally, larger expenses will be more important to franchisees and require more detail.
Read our media release on the Ultra Tune judgement. It includes guidance on meaningful information in marketing fund statements.
Information must not be misleading or deceptive
Laws about information that franchisors give to franchisees apply to marketing funds.
This includes not giving misleading or deceptive information in the marketing fund statement.
Statements must be audited
Marketing fund financial statements must be independently audited, unless 75% of the franchisees in Australia who contribute to the fund vote that an audit is not necessary. Franchisees have to vote on this within 3 months after the end of the financial year, before the marketing fund financial statement is due.