This month's Quick Tips for Franchisors relates to
the disclosure document. All franchisors know that they must
prepare and maintain a current disclosure document, but here are
some points that are sometimes overlooked:
Make sure that your disclosure document includes the amendments
to the Code that came into effect on 1 March 2008. We still see
disclosure documents that do not comply with the March 2008
Regularly review and update your disclosure document.
Incomplete, out-of-date or incorrect information could be used by
an aggrieved franchisee to support a case for precontractual
misleading or deceptive conduct. In particular, carefully check
Item 13 (Payments) and ensure that it discloses sufficient detail
for all franchisee establishment costs and payments. Franchisees
rely on this information.
If the franchise territory or site was previously franchised,
then a separate document must be attached to the disclosure
document that provides certain details for that franchised
business, including the circumstances in which the previous
franchisee ceased to operate. There is no time limitation on this
requirement! The ACCC has indicated to us that this information
must be provided even if the previous franchisee ceased to operate
more than 3 years ago.
The first page of the disclosure document can be signed by a
director, officer or authorised agent of the franchisor. However,
the financial details statement required under item 20 can only be
given by a director of the franchisor. No other person can give or
sign the financial details statement.
Remember, you need to provide a disclosure document where there
is a new franchise, a renewal of an existing franchise or the
extension of an existing franchise.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
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