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.
The franchise agreement is the contract between you and a franchisee. It sets out each party’s rights and responsibilities in relation to the franchised business, as well as each other.
The franchise agreement you provide during the pre-entry disclosure period must be in the form in which it is to be executed. This means that you cannot simply give a draft copy of the agreement.
However, you may make changes to the franchise agreement within the 14 day pre-entry disclosure period if the change is to:
The Code requires you to maintain a disclosure document. You are required to provide a disclosure document to a person proposing to enter into, renew or extend a franchise agreement.
The purpose of a disclosure document is to give a prospective franchisee key information about the franchise system, and an existing franchisee current information about the running of the franchise.
Information you are required to disclose includes:
When a person proposes to enter into a franchise agreement for the first time (as opposed to renewing or extending an existing agreement), you must provide them with a copy of the information statement contained in Annexure 2 of the Code. The information statement is a generic statement that highlights the risks and rewards of franchising.
The information statement should be provided to the prospective franchisee as soon as practicable after they formally apply, or express an interest in, acquiring a franchised business.
While the Code applies to franchise agreements entered into on or after 1 October 1998, certain provisions of the Code will not apply to agreements entered into prior to 1 January 2015 (see table below).
If a franchise agreement is entered into
The following provisions will not apply
Between 1 July 1998 and 29 February 2008
The Code applies to franchise agreements. A ‘franchise agreement’ is an agreement (either written, verbal or
implied) that meets the following conditions: