Marketing fund financial statements
If you require a franchisee to contribute to a marketing or other cooperative fund, you must provide certain information to the franchisee about the fund.
You must prepare an annual financial statement detailing all of the fund’s receipts and expenses. The statement must provide the franchisee with meaningful information about sources of income and items of expenditure (that is, who contributes to the fund and what the money is spent on). For more information about your obligations when dealing with marketing fund money, see Dealing with marketing and advertising fees.
You must have the statement audited by a registered company auditor, unless 75 per cent of the franchisees in Australia that contribute to the fund vote not to audit the statement. This agreement must be made annually within three months of the end of the financial year.
The statement and auditor’s report (if required) must be prepared within four months of the end of your financial year.
You must give a copy of the statement and the auditor’s report (if required) to the franchisees that contribute to the fund, within 30 days of the preparation of the documents.
Example: A franchisor has 50 franchised businesses within its system, including 10 units which it operates as corporate stores. All franchised businesses contribute to the system’s marketing fund.
The franchisor is concerned that it is too costly to audit the marketing and holds a vote of its franchisees to determine whether to audit the fund’s statements. The franchisor is entitled to vote on behalf of the 10 units it operates.
Of the 60 franchises entitled to vote, 36 vote against the audit, 11 vote in favour of the audit and 3 do not vote at all. The franchisor is still required to audit the marketing fund because only 72 per cent voted against the audit.