Franchising

Record-keeping

Record-keeping is necessary to both monitor, and provide evidence of, compliance with the Code and any other applicable legislation. Under the Code you are required to generate or publish certain documents such as disclosure documents, franchise agreements and marketing fund statements.

In addition, if the Code requires, or allows, a franchisee or prospective franchisee to give something to you in writing, you are required to keep this type of document or a copy of it. This includes any documents provided electronically. For example, you must keep the following documents:

Marketing fees & capital expenditure

Dealing with marketing and advertising fees

If you operate a marketing fund, the Code imposes certain restrictions on how you deal with the marketing and advertising fees contributed to that fund.

Firstly, you must maintain a separate bank account for marketing and advertising fees. You must also contribute to the fund on the same basis as other franchisees for each company-owned store that you operate.

Marketing and advertising fees may only be used to meet expenses that:

Your franchise agreement

Freedom of association

You must not restrict or impair the freedom of existing or prospective franchisees to form an association or their ability to associate with one another for a lawful purpose.

General releases and waivers

You must not require a franchisee to sign a general release of the franchisor from liability towards the franchisee.

In addition, a franchise agreement must not contain, or require a franchisee to sign a waiver of any verbal or written representation that you have made.4

Updating and requests for the disclosure document

Updating the disclosure document

Once you have entered into a franchise agreement, the Code requires you to update your disclosure document within four months after the end of each financial year.

However, you are not required to update your disclosure document if you did not enter into more than one franchise agreement during the last financial year (including transferring, renewing or extending a franchise agreement) and you do not intend to enter into another agreement in the following financial year (the disclosure exemption).

Leasing arrangements

If a franchisee leases premises from you (or your associate) for their franchised business, you must give them a copy of the lease or agreement to lease within one month after the document is signed. You must, at the same time, provide the franchisee with the details of any incentive or financial benefit you or your associate will receive as a result of the agreement, including the name of the business providing the incentive or financial benefit.

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.