Advice for franchisors

Your annual compliance calendar

Franchisors with a 30 June financial year should treat the following as fixed dates.

1. Update the disclosure document within four months after the end of the financial year. For a 30 June year end, that means by 31 October. The update has to be real: solvency statement signed by a director, current and former franchisee details, litigation, fees, supplier arrangements and rebates, and now the significant capital expenditure disclosures.
2. Prepare the marketing fund and specific purpose fund statements. A statement of receipts and expenses must be prepared within four months of the end of the financial year, and audited unless the required majority of franchisees vote otherwise. Under the new Code the same accounting and disclosure discipline extends beyond marketing funds to other specific purpose funds such as technology, refurbishment and training funds.
3. Confirm or update your Franchise Disclosure Register profile by the due date each year. Disclosure documents and key facts sheets are no longer uploaded to the register, but the profile information is, including matters such as relevant convictions, judgments and insolvency events affecting the franchisor, its directors and associates, and whether agreements provide for arbitration.
4. Review the agreement and the disclosure document against the Code as it now stands. Restraint clauses, termination clauses and early termination compensation provisions all need to reflect the current position, not the 2014 Code.
5. Audit your own sales files. For each franchise sold in the past year, can you prove the information statement went out in time, the 14 day period ran, and the signed statements were obtained before execution.

Where franchisors actually get caught

• Starting the 14 days from the wrong document. The period runs from when the full set is given. Sending the disclosure document first and the agreement a week later restarts the clock in practice.
• Amending the agreement after disclosure. Material changes can require fresh disclosure and a fresh period. Negotiating right up to signing is where this goes wrong.
• An out of date disclosure document. Using last year's document after the annual update deadline is one of the simplest contraventions to prove.
• Marketing fund expenditure that benefits the franchisor. Funds must be spent on legitimate marketing expenses for the network, kept in a separate account, and accounted for. Using the fund for head office costs or for recruiting new franchisees is a recurring source of dispute.
• Requiring capital expenditure that was never disclosed. Significant capital expenditure must be disclosed in the disclosure document, with the reason, the amount, the timing, the expected outcomes and the risks, and discussed with the prospective franchisee.
• Unfair terms in a standard form agreement. Since 9 November 2023 an unfair term in a standard form small business contract carries civil penalties under the Australian Consumer Law. A franchise agreement is the archetypal standard form contract, and the ACCC has warned the sector specifically about unilateral variation rights and one-sided termination and indemnity clauses.
• Statements made in the sales process. Verbal earnings claims, "you will make it back in eighteen months", are misleading conduct even when the written material is careful.

The obligations added from 1 November 2025

For agreements entered into, renewed, extended or transferred on or after 1 November 2025, three additional obligations apply and they need to be built into the agreement itself, not managed informally.

Compensation for early termination. Where a franchisor withdraws from the Australian market, rationalises its network, or changes its distribution model, the agreement must provide for compensation to affected franchisees, taking into account matters such as lost profit, unamortised capital expenditure, loss of goodwill and wind-up costs, together with buy-back arrangements for specified stock and non-repurposable branded equipment.

A reasonable opportunity to make a return on investment. Where the franchisor requires a franchisee to make an investment, the franchisee must be given a reasonable opportunity, during the term of the agreement, to make a return on it. In practice this is a constraint on requiring a major refit late in a term with no extension.

Specific purpose funds. The marketing fund rules were extended to other funds franchisees contribute to, including technology, refurbishment, training and sustainability funds, with separate accounts, franchisor contribution parity for company-owned outlets, audited statements within four months, and an obligation to provide meaningful information on request within a set period.

What good compliance looks like in practice

The franchisors who avoid trouble do three unglamorous things.

They run onboarding as a documented sequence with dates recorded, not as a sales process with paperwork attached. See on-boarding new franchisees for that sequence.

They keep the disclosure document as a living document, updated when something changes rather than once a year in a panic. A franchisor who adds a supplier rebate in March and remembers it in October has already misdescribed the arrangement to everyone who signed in between.

They handle disputes early and in writing, through the Code process, rather than by ignoring the first complaint. The reputational exposure has increased now that the ASBFEO can publicise franchisors who refuse to participate in alternative dispute resolution. See franchise disputes.