For once, there is no change to the basic format of 2016 Disclosure Document. All franchisors breathe a sigh of relief!
This doesn’t mean you don’t have work to do after the end of the financial year. There is the usual annual update to complete by the end of October 2016.
As a franchisor, the Code requires you to update your Disclosure Document at least once a year and within 4 months of the end of your financial year. This means that for most Australian-based franchisors they must attend to the 2016 update sometime between 1 July 2016 and 31 October 2016. Franchisors legally cannot recruit franchisees without an up–to-date Disclosure Document. So it is crucial to ensure that this document is current and update at least once a year.
The minimum that you will need:
- Updated 2016 -2017 Disclosure Document (with standard updated information regarding new franchisees, franchisee contact details etc);
- Financial statements for the last two completed financial years, or alternatively, an audit report from an independent auditor stating that the franchisor is solvent as of 30 June 2016; and
- Annual financial statement detailing the marketing fund’s receipts and expenses for the last financial year and have that audited unless at least 75% of franchisees have agreed to waive the audit requirement by 30 September 2016.
We strongly suggest you email franchisees in July 2016 and get their email consent to waive the expensive requirement of an audit of the marketing fund. If you leave this too late, then you will need to get the fund audited or be in breach of the Code, which is not a position you want to be in for 2016-2017. If you want to use the above exemption this year, please ensure that you discuss this with your franchisees as soon as possible and have 75% of them email their consent to the exemption.
Please also note that the marketing fund should operate out of a “dedicated” stand alone bank account and any corporate owned operations also have the obligation to pay marketing funds the same way franchisees are obliged to do.
How DC Strategy Can Help
DC Strategy can assist you in all corporate and commercial legal matters including the following:
- Review and update your 2016-2017 Disclosure Document; and
- Help you to obtain the exemption on the audit of the marketing fund, save money and boost the goodwill of your franchise.
We would be pleased to assist you and highly recommend you contact us as soon as possible to comply with these annual requirements.