The franchisor compliance manual

Confirm receipt, professional advice & cooling-off

Confirmation of receipt of the disclosure document

You must not enter into, extend, renew or transfer a franchise agreement (or receive any non-refundable payment in relation to a franchise agreement or an agreement to enter into a franchise agreement) if you have not received a written statement from the franchisee or prospective franchisee that they have received, read and had a reasonable opportunity to understand the disclosure document and the Code.

In practice, the confirmation of receipt is often attached to the disclosure document itself.

Professional advice statement

You also must not enter into a franchise agreement until you have received written statements from an independent legal adviser, business adviser or accountant that they have provided advice to the prospective franchisee. It is not sufficient for the prospective franchisee to provide a statement that they have sought this advice.

If the prospective franchisee chooses not to seek this advice, they must provide you with a signed statement indicating that they were told that they should obtain advice of this kind but decided not to seek it.

While the Code does not require you to obtain a professional advice statement from a franchisee prior to renewing or extending their agreement, it may be a good idea to do so.

Cooling-off period

A prospective franchisee is entitled to a cooling-off period of seven days after entering into a new franchise agreement or making any payment under the agreement, whichever occurs earlier.

If a franchisee terminates the agreement within the cooling-off period, you must fully refund all payments made by the franchisee under the agreement within 14 days. However, you may deduct your reasonable expenses from the amount to be refunded if the expenses or their method of calculation have been set out in the agreement.

The cooling-off period does not apply to the renewal, extension or transfer of an existing franchise agreement.

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