Australian Franchising Code Disclosure Review
The Franchising Code of Conduct requires detailed disclosure documents from franchisors. Learn how to review disclosure documentation for compliance.
The Franchising Code of Conduct is a mandatory industry code regulated under the Competition and Consumer Act 2010. The ACCC is responsible for enforcing the Code, which applies to all franchise agreements entered into or renewed in Australia. The Code establishes extensive disclosure obligations designed to ensure prospective franchisees receive the information they need to make informed decisions before entering a franchise relationship.
Disclosure document compliance is one of the most heavily regulated aspects of Australian franchising. Franchisors must provide a disclosure document at least 14 days before a franchisee enters into a franchise agreement or makes a non-refundable payment. The document must contain prescribed information in a prescribed format, and failure to comply can result in ACCC enforcement action, civil penalties, and invalidation of franchise agreements.
Disclosure Document Requirements
Prescribed Content
The Franchising Code specifies the information that must be included in a disclosure document. The requirements are detailed and specific:
| Item | Required Information |
|---|---|
| Franchisor details | Business name, ABN, company registration, principal place of business, contact details |
| Business experience | Directors' and associates' business experience relevant to the franchise system |
| Litigation history | Current and past proceedings against the franchisor, directors, or associates |
| Payments | All payments the franchisee must make, when they are due, and how they are calculated |
| Supply arrangements | Goods or services the franchisee must acquire and any restrictions on sources |
| Territory | Details of any territory granted, exclusivity arrangements, and conditions |
| Intellectual property | Trade marks, patents, and other IP relevant to the franchise |
| Franchise system | Description of the franchise system, operating procedures, and requirements |
| Earnings information | If the franchisor provides earnings information, it must include the basis and assumptions |
| Financial details | Franchisor's financial statements for the last two financial years |
| Franchisee contact details | Contact details for current and former franchisees |
| End of franchise | Arrangements at the end of the franchise, including transfer, renewal, and termination |
| Dispute resolution | The dispute resolution process under the Code |
| Updates | Material changes since the last disclosure document |
Key Disclosure Obligations
Timing: The disclosure document must be provided at least 14 days before:
- The franchisee enters into the franchise agreement
- The franchisee makes any non-refundable payment to the franchisor
- The franchisee enters into an agreement to acquire an interest in the franchise
Currency: The disclosure document must be updated within four months of the end of each financial year. It must also be updated to reflect material changes within the financial year.
Format: The Code prescribes the format of the disclosure document, including the order of information and the use of prescribed headings. Non-compliant formatting can itself constitute a Code breach.
Common Disclosure Failures
Incomplete Fee Disclosure
One of the most frequent findings in ACCC investigations. Franchisors must disclose all payments a franchisee is required or expected to make, including:
- Initial franchise fees
- Ongoing royalties and their calculation method
- Marketing and advertising fund contributions
- Technology fees, system access fees, and software licensing costs
- Training costs
- Fit-out and equipment requirements
- Insurance requirements and estimated costs
- Renewal fees
- Transfer fees
- Exit or de-branding costs
Omitting or understating any of these payments is a Code breach. The ACCC has taken enforcement action against franchisors who disclosed some fees but omitted others, or who disclosed fee ranges without adequate explanation of what determines where in the range a franchisee will fall.
Misleading Earnings Information
If a franchisor provides earnings information in the disclosure document (this is optional), it must:
- Include the basis on which the information is prepared
- State the assumptions underlying the information
- Identify the period to which the information relates
- Be reasonable and supportable
- Not be misleading
Earnings information that cherry-picks successful outlets, uses unrealistic assumptions, or omits the performance range across the franchise network is a significant compliance risk. Many franchisors choose not to include earnings information to avoid this risk, but verbal earnings representations are also caught by the Code and the Australian Consumer Law.
Litigation History Gaps
The disclosure document must include details of current and past litigation involving the franchisor, its directors, and associates. Common failures include:
- Omitting litigation involving related entities or associates
- Failing to update the litigation section when new proceedings commence
- Excluding settled matters that should still be disclosed
- Not disclosing regulatory enforcement actions
Outdated Franchisee Contact Details
The Code requires disclosure of contact details for current franchisees and franchisees who have left the system in the past three financial years. This information allows prospective franchisees to conduct due diligence. Common failures include outdated contact information and incomplete lists of former franchisees.
Reviewing Disclosure Documents
Annual Update Checklist
When preparing the annual disclosure document update (due within four months of financial year end):
- All fee schedules are current and complete
- Financial statements for the last two financial years are included
- Litigation history is updated including any new proceedings
- Franchisee contact list is current (including former franchisees from last 3 years)
- Territory information reflects current arrangements
- Intellectual property details are current (trade mark registrations, renewals)
- Supply arrangement details are accurate and complete
- All material changes since the last disclosure document are reflected
- Prescribed format and headings are used correctly
- End of franchise arrangements are accurately described
Pre-Provision Review
Before providing a disclosure document to a prospective franchisee:
- Document is the current version (updated within last financial year)
- Any material changes since the last annual update are included
- Site-specific or state-specific information is accurate for this franchisee
- Earnings information (if included) is current and supportable
- The 14-day cooling-off period will be met before the franchise agreement is signed
Consistency Checks
- Fees in the disclosure document match the franchise agreement
- Territory descriptions match the franchise agreement
- Obligations described in the disclosure document match the operations manual
- Marketing materials are consistent with disclosure document representations
- Verbal representations made during recruitment are consistent with the disclosure document
ACCC Enforcement
The ACCC actively enforces the Franchising Code. Enforcement actions in recent years have addressed:
| Issue | Consequence |
|---|---|
| Non-disclosure of payments | Civil penalties, court orders, compensation |
| Misleading earnings claims | Penalties under both the Franchising Code and ACL |
| Failure to provide disclosure | Franchise agreement may be void or voidable |
| Inadequate dispute resolution | Infringement notices, directions |
| Non-compliance with good faith obligation | Court orders, penalties |
Civil penalties under the Franchising Code can be up to $50 million for body corporates per contravention.
How Content Review Tools Support Franchise Disclosure Compliance
Franchise networks produce and maintain disclosure documents, franchise agreements, operations manuals, marketing materials, and recruitment content. These documents must be internally consistent and compliant with the Franchising Code. For franchise systems with multiple brands, states, or business models, the documentation complexity multiplies.
Content review platforms can systematically check disclosure documents for completeness against Code requirements, verify consistency between disclosure documents and franchise agreements, flag outdated information such as expired financial statements or outdated franchisee lists, and assess whether the document meets the prescribed format requirements. By uploading the Franchising Code and ACCC guidance into a knowledge base, franchise compliance teams can review documents against regulatory requirements.
This provides a practical documentation quality layer that catches common compliance gaps. It does not replace legal review of disclosure documents, which remains essential given the complexity of franchising law and the severity of non-compliance consequences. But it ensures that documentation reaching legal review is as complete and consistent as possible, reducing review time and compliance risk.
This article provides general information about Australian Franchising Code disclosure requirements and is not legal advice. Always consult the ACCC for current requirements and seek qualified franchise law advice for your specific situation.