20Franchisor must create disclosure document

20 Franchisor must create disclosure document

Disclosure document to inform franchisee or prospective franchisee (1) A franchisor must create a document relating to a franchise that complies with subsections (3) to (6).

Civil penalty: 600 penalty units.

(2) The purpose of a disclosure document is to: (a) give a prospective franchisee proposing to enter into a franchise agreement information from the franchisor to help the prospective franchisee to make a reasonably informed decision about entering into the agreement; and (b) give a franchisee proposing to renew a franchise agreement, or extend the term or scope of a franchise agreement, information from the franchisor to help the franchisee to make a reasonably informed decision about the proposed renewal or extension of the agreement; and (c) give a franchisee current information from the franchisor that is material to the running of the franchised business. Content and form of disclosure document—general (3) Information in a disclosure document must: (a) comply with the following: (i) be set out in the form and order of Schedule 1; (ii) use the headings and numbering of Schedule 1; (iii) if applicable—include additional information under the heading “Updates”; or (b) comply with the following: (i) if particular items are applicable—use the headings and numbering of Schedule 1 for those items; (ii) if particular items are not applicable—include an attachment that sets out the headings and numbering of Schedule 1 for those items. Content of disclosure document—significant capital expenditure (4) A disclosure document must state: (a) whether the franchisor will require the franchisee to undertake significant capital expenditure in relation to the franchised business during the term of the franchise agreement; and (b) as much information as practicable about any such expenditure, including the following: (i) the rationale for the expenditure; (ii) the amount, timing and nature of the expenditure; (iii) the anticipated outcomes and benefits of the expenditure; (iv) the expected risks associated with the expenditure.

Note: For example, the information could include the type of any upgrades to facilities or premises, any planned changes to the corporate identity of the franchisor’s brand and indicative costs for any building materials.

Signature (5) A disclosure document must be signed by the franchisor, or a director, officer or authorised agent of the franchisor.

Note: For when a document may be signed electronically, see section 10 of the Electronic Transactions Act 1999.

Table of contents (6) A disclosure document must also have a table of contents based on the items in Schedule 1, indicating the page number on which each item begins. If the disclosure document attaches other documents, the table of contents must list these other documents too.