4 Meaning
of franchise agreement
(1) A franchise agreement is an agreement:
(a) that takes the form, in whole or part, of
any of the following:
(i) a written agreement;
(ii) an oral agreement;
(iii) an implied agreement; and
(b) in which a person (the franchisor)
grants to another person (the franchisee) the right to carry on
the business of offering, supplying or distributing goods or services in
Australia under a system or marketing plan substantially determined, controlled
or suggested by the franchisor or an associate of the franchisor; and
(c) under which the operation of the business
will be substantially or materially associated with a trade mark, advertising
or a commercial symbol:
(i) owned, used or licensed by the
franchisor or an associate of the franchisor; or
(ii) specified by the franchisor or an
associate or the franchisor; and
(d) under which, before starting business or
continuing the business, the franchisee must pay or agree to pay to the
franchisor or an associate of the franchisor an amount including, for example:
(i) an initial capital investment fee;
or
(ii) a payment for goods or services;
or
(iii) a fee based on a percentage of
gross or net income whether or not called a royalty or franchise service fee;
or
(iv) a training fee or training school
fee;
but excluding:
(v) payment for goods and services at
or below their usual wholesale price; or
(vi) repayment by the franchisee of a
loan from the franchisor; or
(vii) payment of the usual wholesale
price for goods taken on consignment; or
(viii) payment of market value for
purchase or lease of real property, fixtures, equipment or supplies needed to
start business or to continue business under the franchise agreement.
(2) For subclause (1),
each of the following is taken to be a franchise agreement:
(a) transfer, renewal, extension, or extension
of the scope of a franchise agreement;
(b) a motor vehicle dealership agreement.
(3) However, any of the following does not in itself
constitute a franchise agreement:
(a) an employer and employee relationship;
(b) a partnership relationship;
(c) a landlord and tenant relationship;
(d) a mortgagor and mortgagee relationship;
(e) a lender and borrower relationship;
(f) the relationship between the members of a
cooperative that is registered, incorporated or formed under any of the
following laws:
(i) Co‑operatives Act 1992
of New South Wales;
(ii) Co‑operatives Act 1996
of Victoria;
(iii) Cooperatives Act 1997 of
Queensland;
(iv) Co‑operative and Provident
Societies Act 1903 of Western Australia;
(v) Co‑operatives Act 1997
of South Australia;
(vi) Co‑operative Industrial
Societies Act 1928 of Tasmania;
(vii) Co‑operative Societies Act
1939 of the Australian Capital Territory;
(viii) Co‑operatives Act 1997
of the Northern Territory;
(ix) the Corporations Act 2001.
5 Application
(1) This code applies to a franchise agreement entered
into on or after 1 October 1998.
(1A) An amendment of this code that commences on or after
1 March 2008 applies to a franchise agreement entered into on or after the
date on which the amendment commences.
(1B) An amendment of this code that commences on or after 1
July 2010 applies to a franchise agreement entered into on or after the date on
which the amendment commences.
(2) For the parties to a franchise agreement entered
into before 1 October 1998:
(a) clauses 14 (Copy of lease), 15 (Association
of franchisees) and 17 (Marketing and other cooperative funds) apply to the
parties on and after 1 July 1998; and
(b) the rest of this code applies to the parties
on and after 1 October 1998.
(3) However, this code does not apply to a franchise
agreement:
(a) to which another mandatory industry code,
prescribed under section 51AE of the Act, applies; or
(b) if:
(i) the franchise agreement is for
goods or services that are substantially the same as those supplied by the
franchisee before entering into the franchise agreement; and
(ii) the franchisee has supplied those
goods or services for at least 2 years immediately before entering into the
franchise agreement; and
(iii) sales under the franchise are
likely to provide no more than 20% of the franchisee’s gross turnover for goods
or services of that kind for the first year of the franchise.
(4) Paragraph (3) (b) ceases to apply to a franchise
agreement if:
(a) sales under the franchise provide more than
20% of the franchisee’s gross turnover for the goods or services for
3 consecutive years; and
(b) the franchisee tells the franchisor that
paragraph (a) applies.
Part 2 Disclosure
Division
2.1 Disclosure document
6 Franchisor
must maintain a disclosure document
(1) A franchisor must, before entering into a franchise
agreement, and within 4 months after the end of each financial year after
entering into a franchise agreement, create a document (a disclosure
document) for the franchise in accordance with this Division.
(2) A disclosure
document:
(a) must be:
(i) if the franchised business has an
expected annual turnover at any time during the term of the franchise agreement
of $50 000 or more — in accordance with Annexure 1; or
(ii) if the franchised business has an
expected annual turnover of less than $50 000 — in accordance with
Annexure 1 or 2; and
(b) may include additional information under the
heading ‘Other relevant disclosure information’; and
(c) must be signed by the franchisor, or a
director, officer or authorised agent of the franchisor.
6A Purpose of disclosure document
The purposes of a disclosure document are:
(a) to give to a prospective franchisee, or a
franchisee proposing to enter into, renew, extend or extend the scope of a
franchise agreement, information from the franchisor to help the franchisee to
make a reasonably informed decision about the franchise; and
(b) to give a franchisee current information from
the franchisor that is material to the running of the franchised business.
6B Requirement
to give disclosure document
(1) A franchisor must give a current disclosure document
to:
(a) a prospective franchisee; or
(b) a franchisee, if the franchisor or the
franchisee proposes to renew, extend, or extend the scope of the franchise
agreement.
(2) If a subfranchisor proposes to grant a subfranchise
to a prospective subfranchisee:
(a) the franchisor and subfranchisor must:
(i) give separate disclosure
documents, in relation to the master franchise and the subfranchise
respectively, to the prospective subfranchisee; or
(ii) give to the prospective
subfranchisee a joint disclosure document that addresses the respective
obligations of the franchisor and the subfranchisor; and
(b) the subfranchisor must comply with the
requirements imposed on a franchisor by this Part.
Note A subfranchisor is also sometimes
referred to as a master franchisee: see subclause 3 (1).
6C Additional
information
If a franchisee or prospective franchisee who is
given a disclosure document in accordance with Annexure 2 asks the franchisor
for the information referred to in sections 3, 5, 6, 9, 10, 11, 14, 17, 18, 19,
21 and 22 of Annexure 1, the franchisor must give that information.
7 Layout
(1) Information in a disclosure document must be set
out:
(a) in the form and the order, and under the
numbering, set out in Annexure 1 or 2 as the case requires (the relevant
Annexure); and
(b) under the titles used in the relevant
Annexure.
(2) A disclosure document must have a table of contents
based on the items in the relevant Annexure, indicating the page number on
which each item begins.
Division
2.2 Before franchise agreement
8 Application
This Division applies to a disclosure document in
accordance with Annexure 1 or 2 for:
(a) a prospective franchisee; or
(b) a franchisee, if the franchisee or franchisor
proposes to enter into, renew, extend, or extend the scope of the franchise
agreement.
10 Franchisor
obligations
A franchisor must give:
(a) a copy of this code; and
(b) a disclosure document; and
(c) a copy of the franchise agreement, in the
form in which it is to be executed;
to:
(d) a prospective
franchisee at least 14 days before the prospective franchisee:
(i) enters into a franchise agreement
or an agreement to enter into a franchise agreement; or
(ii) makes a non‑refundable
payment (whether of money or of other valuable consideration) to the franchisor
or an associate of the franchisor in connection with the proposed franchise
agreement; or
(e) if the
franchisor or franchisee proposes to renew, extend or extend the scope of the
franchise agreement — a franchisee at least 14 days before renewal,
extension, or extension of the scope of the franchise agreement.
Note Subsection 9 (1) of the Electronic
Transactions Act 1999 provides that a requirement under a law of the
Commonwealth to give information in writing is satisfied by giving the
information electronically if it is reasonable to expect that the information
will be readily accessible so as to be useable for subsequent reference, and
the person to whom the information is given consents to it being provided
electronically.
11 Advice
before entering into franchise agreement
(1) The franchisor must not:
(a) enter into, renew, extend, or extend the
scope of a franchise agreement; or
(b) enter into an agreement to enter into, renew,
extend, or extend the scope of a franchise agreement; or
(c) receive a non‑refundable payment
(whether of money or of other valuable consideration) under a franchise
agreement or an agreement to enter into a franchise agreement;
unless the franchisor has received from the franchisee or
prospective franchisee a written statement that the franchisee or prospective
franchisee has received, read and had a reasonable opportunity to understand
the disclosure document and this code.
(2) Before a franchise agreement is entered into,
the franchisor must have received from the prospective franchisee:
(a) signed statements, that the prospective
franchisee has been given advice about the proposed franchise agreement or
franchised business, by any of:
(i) an independent legal adviser;
(ii) an independent business adviser:
(iii) an independent accountant; or
(b) for each kind of statement not received under
paragraph (a), a signed statement by the prospective franchisee that the
prospective franchisee:
(i) has been given that kind of advice
about the proposed franchise agreement or franchised business; or
(ii) has been told that that kind of
advice should be sought but has decided not to seek it.
(3) Subclause (2):
(a) does not apply to the renewal, extension or
extension of the scope of a franchise agreement with a franchisor; and
(b) does not prevent the franchisor from
requiring any or all of the statements mentioned in paragraph (2) (a).
Part 3 Conditions of
franchise agreement
13 Cooling
off period
(1) A franchisee may terminate an agreement (being
either a franchise agreement or an agreement to enter into a franchise
agreement) within 7 days after the earlier of:
(a) entering into the agreement; or
(b) making any payment (whether of money or of
other valuable consideration) under the agreement.
(2) Subclause (1) does not apply to the renewal, extension,
extension of the scope or transfer of an existing franchise agreement.
(3) If the franchisee terminates an agreement
under subclause (1), the franchisor must, within 14 days, return all payments
(whether of money or of other valuable consideration) made by the franchisee to
the franchisor under the agreement.
(4) However, the franchisor may deduct from the amount
paid under subclause (3) the franchisor’s reasonable expenses if the expenses
or their method of calculation have been set out in the agreement.
14 Copy
of lease
(1) If a franchisee leases premises from the franchisor
or an associate of the franchisor for the purposes of a franchised business,
the franchisor or the associate from which the premises are leased must give to
the franchisee 1 of the documents mentioned in subclause (2) within
1 month after the lease or agreement to lease is signed by the parties.
(2) For subclause (1), the documents are:
(a) a copy of the agreement to lease;
(b) a copy of the lease.
(3) If the franchisee occupies, without a lease,
premises leased by the franchisor or an associate of the franchisor, the
franchisor or the associate who leases the premises must give to the franchisee
1 of the documents mentioned in subclause (4) within 1 month after:
(a) the occupation commences; or
(b) for the documents mentioned in paragraph
(4) (b) — the documents are signed by the parties.
(4) For subclause (3), the documents are:
(a) a copy of the franchisor’s or associate’s lease
or agreement to lease;
(b) a copy of the documents that give the
franchisee rights to occupy the premises;
(c) written details of the conditions of
occupation.
15 Association
of franchisees or prospective franchisees
A franchisor must not induce a franchisee or
prospective franchisee:
(a) not to form an association; or
(b) not to associate with other franchisees or
prospective franchisees for a lawful purpose.
16 Prohibition
on release from liability etc
(1) A franchise agreement entered into on or after
1 July 1998 must not contain, or require a franchisee to sign, a general
release of the franchisor from liability towards the franchisee.
(1A) A franchise agreement entered into on or after
1 March 2008 must not contain, or require a franchisee to sign, a waiver
of any verbal or written representation made by the franchisor.
(2) However, subclauses (1) and (1A) do not prevent
a franchisee from settling a claim against the franchisor after entering into a
franchise agreement.
17 Marketing
and other cooperative funds
(1) If a franchise agreement provides that a franchisee
must pay money to a marketing or other cooperative fund, the franchisor must:
(a) within 4 months after the end of the last
financial year, prepare an annual financial statement detailing all of the
fund’s receipts and expenses for the last financial year; and
(b) have the statement audited by a registered
company auditor within 4 months after the end of the financial year to which it
relates; and
(c) give to the franchisee:
(i) a copy of the statement, within 30
days of preparing the statement; and
(ii) a copy of the auditor’s report, if
such a report is required, within 30 days of preparing the report.
(2) A franchisor does not have to comply with paragraph
(1) (b) for a financial year if:
(a) 75% of the franchisor’s franchisees in
Australia, who contribute to the fund, have voted to agree that the franchisor
does not have to comply with the paragraph; and
(b) that agreement is made within 3 months after
the end of the financial year.
(3) The agreement
referred to in paragraph (2) (a) will remain in force for 3 years, and
franchisees must vote, at the end of that time, in accordance with paragraph
(2) (a), for the agreement to remain in force.
(4) If a franchise agreement provides that a franchisee
must pay money to a marketing or other cooperative fund, the reasonable costs
of administering and auditing the fund must be paid from the fund.
18 Disclosure
of materially relevant facts
(1) If a disclosure document does not mention a matter
mentioned in subclause (2), the franchisor must tell a franchisee or
prospective franchisee about the matter, in writing, within a reasonable time
(but not more than 14 days) after the franchisor becomes aware of it.
(2) For subclause (1), the matters are the following:
(a) change in majority ownership or control of
the franchisor;
(b) proceedings by a public agency, a judgment in
criminal or civil proceedings or an award in an arbitration against the
franchisor or a franchisor director in Australia alleging:
(i) breach
of a franchise agreement; or
(ii) contravention
of trade practices law; or
(iii) contravention of the Corporations
Act 2001; or
(iv) unconscionable conduct; or
(v) misconduct; or
(vi) an offence of dishonesty;
(c) a judgment against the franchisor, other
than for unfair dismissal of an employee, under:
(i) Part 3 of the Independent
Contractors Act 2006; or
(ii) section 106 of the Industrial
Relations Act 1996 of New South Wales;
or
(iii) section 276 of the Industrial
Relations Act 1999 of Queensland;
(d) civil proceedings in Australia against the
franchisor or a franchisor director by at least 10%, or 10, of the franchisees
in Australia of the franchisor (whichever is the lower);
(e) any judgment that is entered against the
franchisor in Australia, and is not discharged within 28 days, for at least:
(i) for a small proprietary
company — $100,000; or
(ii) for any other company —
$1,000,000;
(f) any judgment that is entered against the
franchisor in a matter mentioned in item 4.2 of Annexure 1 or item 3.2 of
Annexure 2;
(g) the franchisor becoming an externally‑administered
body corporate;
(h) a change in the intellectual property, or
ownership or control of the intellectual property, that is material to the franchise
system;
(i) the existence and content of any
undertaking or order under section 87B of the Act.
(3) For paragraphs (2) (b), (c), (d), (e) and (f),
the franchisor must tell the franchisee:
(a) the names of
the parties to the proceedings; and
(b) the name of the court or tribunal; and
(c) the case number; and
(d) the general nature of the proceedings.
(4) For paragraph (2) (g), the franchisor must tell
the franchisee the name and address of the administrator, controller or
liquidator.
(5) For paragraph (2) (i), this information must be
disclosed within a reasonable time (but not more than 14 days) after the
undertaking or order is given.
Note Nothing in this code affects the
operation of Part VIIC of the Crimes Act 1914 (which includes provisions
that, in certain circumstances, relieve persons from the requirement to
disclose spent convictions and require persons aware of such convictions to
disregard them).
19 Current
disclosure document
(1) A franchisor must give to a franchisee a
current disclosure document within 14 days after a written request by the
franchisee.
(2) However, a request under subclause (1) can be made
only once in 12 months.
20 Transfer
or novation of franchise
(1) A request for a franchisor’s consent to transfer or
novation of a franchise must be made in writing.
(2) A franchisor must not unreasonably withhold consent
to the transfer or novation .
(3) For subclause (2), circumstances in which it is
reasonable for a franchisor to withhold consent include:
(a) the proposed transferee is unlikely to be
able to meet the financial obligations that the proposed transferee would have
under the franchise agreement; or
(b) the proposed transferee does not meet a
reasonable requirement of the franchise agreement for the transfer or novation
of a franchise; or
(c) the proposed transferee has not met the
selection criteria of the franchisor; or
(d) agreement to the transfer or novation will
have a significantly adverse effect on the franchise system; or
(f) the proposed transferee does not agree in
writing to comply with the obligations of the franchisee under the franchise
agreement; or
(g) the franchisee has not paid or made
reasonable provision to pay an amount owing to the franchisor; or
(h) the franchisee has breached the franchise
agreement and has not remedied the breach.
(4) The franchisor is taken to have given consent
to the transfer or novation if the franchisor does not, within 42 days after
the request was made, give to the franchisee written notice:
(a) that consent is withheld; and
(b) setting out why consent is withheld.
(5) In this clause:
transferee means a franchisee who seeks to
acquire a franchise business through either transfer or novation of the
franchised business.
20A End
of term arrangements — notification by franchisor
(1) If the term of a
franchise agreement is 6 months or longer, the franchisor must notify the
franchisee, at least 6 months before the end of the term of the franchise
agreement, of the franchisor’s decision:
(a) to renew or not to renew the franchise
agreement; or
(b) to enter into a new franchise agreement.
(2) If the term of a franchise agreement is less than 6
months, the franchisor must notify the franchisee, at least 1 month before the
end of the term of the franchise agreement, of the franchisor’s decision:
(a) to renew or not to renew the franchise
agreement; or
(b) to enter into a new franchise agreement.
21 Termination —
breach by franchisee
(1) This clause applies if:
(a) a franchisee breaches a franchise agreement;
and
(b) the franchisor proposes to terminate the
franchise agreement; and
(c) clause 23 does not apply.
(2) The franchisor must:
(a) give to the franchisee reasonable notice
that the franchisor proposes to terminate the franchise agreement because of the
breach; and
(b) tell the franchisee what the franchisor
requires to be done to remedy the breach; and
(c) allow the franchisee a reasonable time to
remedy the breach.
(3) For paragraph (2) (c), the franchisor does not
have to allow more than 30 days.
(4) If the breach is remedied in accordance with
paragraphs (2) (b) and (c), the franchisor cannot terminate the franchise
agreement because of that breach.
(5) Part 4 (resolving disputes) applies in relation to a
dispute arising from termination under this clause.
22 Termination —
no breach by franchisee
(1) This clause applies if:
(a) a franchisor terminates a franchise
agreement:
(i) in accordance with the agreement;
and
(ii) before it expires; and
(iii) without the consent of the
franchisee; and
(b) the franchisee has not breached the
agreement; and
(c) clause 23 does not apply.
(2) For subparagraph (1) (a) (iii), a condition of a
franchise agreement that a franchisor can terminate the franchise agreement
without the consent of the franchisee is not taken to be consent.
(3) Before terminating the franchise agreement, the
franchisor must give reasonable written notice of the proposed termination, and
reasons for it, to the franchisee.
(4) Part 4 (resolving disputes) applies in relation to a
dispute arising from termination under this clause.
23 Termination —
special circumstances
A franchisor does not have to comply with clause 21
or 22 if the franchisee:
(a) no longer holds a licence that the
franchisee must hold to carry on the franchised business; or
(b) becomes bankrupt, insolvent under
administration or an externally‑administered body corporate; or
(c) voluntarily abandons the franchised business
or the franchise relationship; or
(d) is convicted of a serious offence; or
(e) operates the franchised business in a way
that endangers public health or safety; or
(f) is fraudulent in connection with operation
of the franchised business; or
(g) agrees to termination of the franchise
agreement.
23A Good
faith
Nothing in this code limits any obligation imposed
by the common law, applicable in a State or Territory, on the parties to a
franchise agreement to act in good faith.
Part 4 Resolving disputes
24 Definitions
In this Part:
complainant means the person who starts the
procedure under clause 29.
parties means the complainant and the
respondent in a dispute arising under a franchise agreement or this code.
respondent means the person with whom the
complainant has a dispute.
25 Mediation
adviser
A mediation adviser is to be appointed for this
Part by the Minister.
26 Internal
complaint handling procedure
A franchise agreement entered into on or after 1
October 1998 must provide for a complaint handling procedure that complies with
clauses 29 and 30.
27 Code
complaint handling procedure
A party to a franchise agreement who has a dispute
with another party to the franchise agreement may start the procedure under
clause 29.
28 Choice
of procedure
A party to a franchise agreement who has a dispute
with another party to the franchise agreement may, at any time, choose to use
the procedure under clause 26 or 27.
29 Procedure
(1) The complainant must tell the respondent in writing:
(a) the nature of the dispute; and
(b) what outcome the complainant wants; and
(c) what action the complainant thinks will
settle the dispute.
(2) The parties should then try to agree about how to
resolve the dispute.
(3) For mediation under a franchise agreement:
(a) if the parties cannot agree under subclause
(2) within 3 weeks, either party may refer the matter to a mediator; and
(b) if the parties cannot agree about who should
be the mediator, either party may ask the mediation adviser to appoint a
mediator.
(4) For mediation under this code, either party may ask
the mediation adviser to appoint a mediator.
(5) Subject to subclause (5A), the mediator may decide
the time and place for mediation.
(5A) Mediation under this code must be conducted in
Australia.
(6) The parties must attend the mediation and try to
resolve the dispute.
(7) For subclause (6), a party is taken to attend
mediation if the party is represented at the mediation by a person who has the
authority to enter an agreement to settle the dispute on behalf of the party.
(8) For subclause (6), a party will be taken to be
trying to resolve a dispute if the party approaches the resolution of the
dispute in a reconciliatory manner, including doing any of the following:
(a) attending and participating in meetings at
reasonable times;
(b) at the beginning of the mediation process,
making the party’s intention clear as to what the party is trying to achieve
through the mediation process;
(c) observing any obligations relating to
confidentiality that apply during or after the mediation process;
(d) not taking action during the dispute, including
by providing inferior goods, services, or support, which has the effect of
damaging the reputation of the franchise system;
(e) not refusing to take action during the
dispute, including not providing goods, services or support, if the refusal to
act would have the effect of damaging the reputation of the franchise system.
30 Mediation
under the code
(1) The mediation adviser must, within 14 days after
referral under paragraph 29 (3) (b) or subclause 29 (4), appoint
a mediator for the dispute.
(2) After mediation under this code has started, the
mediator must tell the mediation adviser, within 28 days, that mediation has
started.
30A Termination
of mediation
(1) This clause applies if:
(a) at least 30 days have elapsed after the
start of mediation of a dispute; and
(b) the dispute has not been resolved.
(2) If either party asks the mediator to terminate the
mediation, the mediator must do so.
(3) Subject to subclause (2), the mediator may terminate
the mediation at any time unless satisfied that a resolution of the dispute is
imminent.
(4) If the mediator terminates the mediation of a
dispute under this clause, the mediator must issue a certificate stating:
(a) the names of the parties; and
(b) the nature of the dispute; and
(c) that the mediation has finished; and
(d) that the dispute has not been resolved.
(5) The mediator must give a copy of the certificate to:
(a) the mediation adviser; and
(b) each of the parties to the dispute.
31 Conditions
(1) This Part does not affect the right of a party to a
franchise agreement to take legal proceedings under the franchise agreement.
(2) The parties are equally liable for the costs of
mediation under this Part unless they agree otherwise.
(3) The parties must pay for their own costs of attending
the mediation.
(4) In this clause:
the costs of mediation under this Part
includes the following:
(a) the cost of the mediator;
(b) the cost of room hire;
(c) the cost of any additional input (including
expert reports) agreed by both parties to be necessary to the conduct of the
mediation.
Annexure
1 Disclosure document for franchisee or
prospective franchisee
(subclause 6 (2))
1 First
page
1.1 On the first page:
(a) in bold upper case:
DISCLOSURE DOCUMENT FOR FRANCHISEE OR
PROSPECTIVE FRANCHISEE; and
(b) the franchisor’s:
(i) name; and
(ii) business address and phone number;
and
(iii) ABN, ACN or ARBN (or foreign
equivalent if the franchisor is a foreign franchisor); and
(c) the signature of the franchisor, or of a
director, officer or authorised agent of the franchisor; and
(d) the preparation date of the
disclosure document; and
(e) the following statement:
This disclosure document contains some of
the information you need in order to make an informed decision about whether to
enter into a franchise agreement.
Entering into a franchise agreement is a
serious undertaking. Franchising is a business and, like any business, the
franchise (or franchisor) could fail during the franchise term. This could have
consequences for the franchisee.
A franchise agreement is legally binding on
you if you sign it.
You are entitled to a waiting period of 14
days before you enter into this agreement.
If this is a new franchise agreement (not a
renewal, extension, extension of the scope or transfer of an agreement), you
will be entitled to a 7 day ‘cooling off’ period after signing the agreement,
during which you may terminate the agreement.
If you decide to terminate the agreement
during the cooling off period, the franchisor must, within 14 days, return all
payments (whether of money or of other valuable consideration) made by you to
the franchisor under the agreement. However, the franchisor may deduct from
this amount the franchisor’s reasonable expenses, if the expenses or their
method of calculation have been set out in the agreement.
Take your time, read all the documents
carefully, talk to other franchisees and assess your own financial resources
and capabilities to deal with the requirements of the franchised business.
You should make your own enquiries about
the franchise and about the business of the franchise.
You should get independent legal,
accounting and business advice before signing the franchise agreement.
It is often prudent to prepare a business
plan and projections for profit and cash flow.
You should also consider educational
courses, particularly if you have not operated a business before.
2 Franchisor
details
2.1 The franchisor’s:
(a) name; and
(b) address, or addresses, of registered office
and principal place of business in Australia; and
(c) ABN, ACN or ARBN (or foreign equivalent if
the franchisor is a foreign franchisor).
2.2 The name under which the franchisor carries on
business in Australia relevant to the franchise.
2.3 A description of the kind of business operated under
the franchise.
2.4 The name, ABN, ACN or ARBN, address of registered
office and principal place of business of each associate of the franchisor that
is a body corporate (if any).
2.5 The name and address of each associate of the franchisor
that is not a body corporate (if any).
2.6 For each officer of the franchisor — name,
position held and qualifications (if any).
3 Business
experience
3.1 A summary of the relevant business experience in the
last 10 years of each person mentioned in item 2.6.
3.2 A summary of relevant business experience of the
franchisor in the last 10 years, including:
(a) length of experience in:
(i) operating a business that is
substantially the same as that of the franchise; and
(ii) offering other franchises that are
substantially the same as the franchise; and
(b) whether the franchisor has offered franchises
for other businesses and, if so:
(i) a description of each such
business; and
(ii) for how long the franchisor
offered franchises for each such business.
4 Litigation
4.1 Details of:
(a) current proceedings by a public agency,
criminal or civil proceedings or arbitration, relevant to the franchise,
against the franchisor or a franchisor director in Australia alleging:
(i) breach of a franchise agreement;
or
(ii) contravention of trade practices
law; or
(iii) contravention
of the Corporations Act 2001; or
(iv) unconscionable
conduct; or
(v) misconduct; or
(vi) an offence of dishonesty; and
(b) proceedings against the franchisor under:
(i) section 127A or 127B of the Workplace Relations Act 1996;
or
(ii) section 106 of the Industrial
Relations Act 1996 of New South Wales;
or
(iii) section 276 of the Industrial
Relations Act 1999 of Queensland.
4.2 Whether the franchisor or a director
of the franchisor has been:
(a) in the last 10 years — convicted of a
serious offence, or an equivalent offence outside Australia; or
(b) in the last 5 years — subject to final
judgment in civil proceedings for a matter mentioned in paragraph 4.1 (a);
or
(c) in the last 10 years — bankrupt,
insolvent under administration or an externally‑administered body
corporate in Australia or elsewhere.
4.3 For items 4.1 and 4.2 — the following details
(where relevant):
(a) the names of the parties to the proceedings;
(b) the name of the court, tribunal or
arbitrator;
(c) the case number;
(d) the general nature of the proceedings;
(e) the current status of the proceedings;
(f) the date and content of any undertaking or
order under section 87B of the Act;
(g) the penalty or damages assessed or imposed;
(h) the names of the persons who are bankrupt,
insolvent under administration or externally administered;
(i) the period of the bankruptcy, insolvency
under administration or external administration.
5 Payments
to agents
5.1 For any agreement under which the franchisor must pay
an amount, or give other valuable consideration, to a person who is not an
officer, director or employee of the franchisor in connection with the
introduction or recruitment of a franchisee — the name of the person.
6 Existing
franchises
6.1 Number, sorted by State, Territory or region, of:
(a) existing franchised businesses; and
(b) existing franchisees; and
(c) businesses owned or operated by the
franchisor in Australia that are substantially the same as the franchise.
6.2 For each existing franchisee:
(a) business address, if this is not the
franchisee’s residential address; and
(b) business phone number; and
(c) year when the franchisee started operating
the franchised business.
6.3 However, if there are more than 50 franchises, the
franchisor may instead give details under item 6.2 for all franchisees in the
State, region or metropolitan area in which the franchise is to be operated.
6.4 For each of the last 3 financial years and for each
of the following events — the number of franchised businesses for which
the event happened:
(a) the franchise was transferred;
(b) the franchised business ceased to operate;
(c) the franchise agreement was terminated by
the franchisor;
(d) the franchise agreement was terminated by the
franchisee;
(e) the franchise agreement was not renewed when
it expired;
(f) the franchised business was bought back by
the franchisor;
(g) the franchise
agreement was terminated and the franchised business was acquired by the
franchisor.
Note An event may be counted more than
once if more than 1 paragraph applies to it.
6.5 Subject to item 6.6, the franchisor must supply, for
each event mentioned in item 6.4, the name, location and contact details
of each franchisee, if the information is available.
6.6 A franchisor does not have to provide details of a
franchisee if the franchisee has requested in writing that the details not be
disclosed.
7 Intellectual
property
7.1 For any trade mark used to identify, and for any
patent, design or copyright that is material to, the franchise system (intellectual
property):
(a) description of the intellectual property;
and
(b) details of the franchisee’s rights and
obligations in connection with the use of the intellectual property; and
(c) whether the intellectual property is
registered in Australia, and if so, the registration date, registration number
and place of registration; and
(d) any judgment or pending proceedings that
could significantly affect ownership or use of the intellectual property,
including:
(i) name of court or tribunal; and
(ii) matter number; and
(iii) summary of the claim or judgment;
and
(e) if the intellectual property is not owned by
the franchisor — who owns it; and
(f) details of any agreement that significantly
affects the franchisor’s rights to use, or to give others the right to use, the
intellectual property, including:
(i) parties to the agreement; and
(ii) nature and extent of any
limitation; and
(iii) duration of the agreement; and
(iv) conditions under which the
agreement may be terminated.
7.2 The franchisor is taken to comply with item 7.1 for
any information that is confidential if the franchisor gives:
(a) a general description of the subject matter;
and
(b) a summary of conditions for use by the
franchisee.
8 Franchise
site or territory
8.1 Whether the franchise is:
(a) for an exclusive or non‑exclusive
territory; or
(b) limited to a particular site.
8.2 For the territory of the franchise:
(a) whether other franchisees may operate a
business that is substantially the same as the franchised business; and
(b) whether the franchisor or an associate of the
franchisor may operate a business that is substantially the same as the
franchised business; and
(c) whether the franchisor or an associate of
the franchisor may establish other franchises that are substantially the same
as the franchise; and
(d) whether the franchisee may operate a business
that is substantially the same as the franchised business outside the territory
of the franchise; and
(e) whether the franchisor may change the
territory of the franchise.
9 Supply
of goods or services to a franchisee
9.1 For the franchisor’s requirements for supply of goods
or services to a franchisee — details of:
(a) any requirement for the franchisee to
maintain a level of inventory or acquire an amount of goods or services; and
(b) restrictions on acquisition of goods or
services by the franchisee from other sources; and
(c) ownership by
the franchisor or an associate of the franchisor of an interest in any supplier
from which the franchisee may be required to acquire goods or services; and
(d) the obligation of the franchisee to accept
goods or services from the franchisor, or from an associate of the franchisor;
and
(e) the franchisor’s obligation to supply goods
or services to the franchisee; and
(f) whether the franchisee will be offered the
right to be supplied with the whole range of the goods or services of the
franchise; and
(g) conditions under which the franchisee can
return goods, and to whom; and
(h) conditions under which the franchisee can
obtain a refund for services provided by the franchisor, and from whom; and
(i) whether the franchisor may change the range
of goods or services, and if so, to what extent; and
(j) whether the franchisor, or an associate of
the franchisor, will receive a rebate or other financial benefit from the
supply of goods or services to franchisees, including the name of the business
providing the rebate or financial benefit; and
(k) whether any rebate or financial benefit
referred to under paragraph (j) is shared, directly or indirectly, with
franchisees.
Note Before a requirement is made under
paragraph (b) or (c), the franchisor may notify, or seek authorisation from,
the Australian Competition and Consumer Commission (see Act, Part VII).
10 Supply
of goods or services by a franchisee
10.1 For the franchisor’s requirements for supply of goods
or services by a franchisee — details of:
(a) restrictions on the goods or services that
the franchisee may supply; and
(b) restrictions on the persons to whom the
franchisee may supply goods or services; and
(c) whether the franchisee must supply the whole
range of the goods or services of the franchise.
Note Before a requirement is made under
paragraph (a) or (b), the franchisor may notify, or seek authorisation from,
the Australian Competition and Consumer Commission (see Act, Part VII).
11 Sites or Territories
11.1 The policy of the franchisor, or an associate of the
franchisor, for selection of as many of the following as are relevant:
(a) the site to be occupied by the franchised
business;
(b) the territory in which the franchised
business is to operate.
11.2 Details of whether the territory or site to be franchised
has been subject to a franchised business operated by a previous franchise
granted by the franchisor and, if so, details of the franchised business,
including the circumstances in which the previous franchisee ceased to operate.
11.3 The details mentioned in item 11.2 must be provided:
(a) in a separate document; and
(b) with the disclosure document.
12 Marketing
or other cooperative funds
12.1 For each marketing or other cooperative fund,
controlled or administered by or for the franchisor, to which the franchisee
may be required to contribute, the following details:
(a) the kinds of persons who contribute to the
fund (for example, franchisee, franchisor, outside supplier);
(b) whether the franchisor must contribute to the
fund in relation to businesses owned or operated by the franchisor that are
substantially the same as the franchised business and, if so, whether the
contribution is worked out in the same way as for a franchisee;
(c) how much the franchisee must contribute to
the fund and whether other franchisees must contribute at a different rate;
(d) who controls or administers the fund;
(e) whether the fund is audited and, if so, by
whom and when;
(f) whether the fund’s financial statements can
be inspected by, or will be given to, franchisees;
(g) the kinds of expense for which the fund may
be used;
(h) the fund’s expenses for the last financial
year, including the percentage spent on production, advertising, administration
and other stated expenses;
(i) whether the franchisor or its associates
supply goods or services for which the fund pays and, if so, details of the
goods or services;
(j) whether the
franchisor must spend part of the fund on marketing, advertising or promoting
the franchisee’s business.
13 Payments
Prepayments
13.1 If the franchisor requires a payment before the
franchise agreement is entered into — why the money is required, how the
money is to be applied and who will hold the money.
13.2 The conditions under which a payment will be refunded.
Establishment costs
13.3 Details of the range of costs to start operating the
franchised business, based on current practice, for the following matters:
(a) real property, including property type,
location and building size;
(b) equipment, fixtures, other fixed assets, construction,
remodelling, leasehold improvements and decorating costs;
(c) inventory required to begin operation;
(d) security deposits, utility deposits, business
licences, insurance and other prepaid expenses;
(e) additional funds, including working capital,
required by the franchisee before operations begin;
(f) other payments by a franchisee to begin
operations.
13.4 For item 13.3, the
details for each payment must include:
(a) description of the payment; and
(b) amount of the payment or the formula used to
work out the payment; and
(c) to whom the payment is made; and
(d) when the payment is due; and
(e) whether the payment is refundable and, if
so, under what conditions.
13.5 For item 13.4, if the amount of the payment cannot
easily be worked out — the upper and lower limits of the amount.
Other payments
13.6 For each recurring or isolated payment payable by the
franchisee to the franchisor or an associate of the franchisor or to be
collected by the franchisor or an associate of the franchisor for another
person:
(a) description of the payment; and
(b) amount of the payment or formula used to work
out the payment; and
(c) to whom the payment is made; and
(d) when the payment is due; and
(e) whether the payment is refundable and, if
so, under what conditions.
13.6A For each recurring or isolated payment, that is within
the knowledge or control of the franchisor or is reasonably foreseeable by the
franchisor, that is payable by the franchisee to a person other than the
franchisor or an associate of the franchisor:
(a) a description of the payment; and
(b) the amount of the payment or formula used to
work out the payment; and
(c) to whom the payment is made; and
(d) when the payment is due; and
(e) whether the payment is refundable and, if
so, under what conditions.
13.7 For item 13.6 or 13.6A, if the amount of the payment
cannot easily be worked out — the upper and lower limits of the amount.
13.8 If 2 or more of items 13.1, 13.3 and 13.6 apply to a
payment, the information required by those items in relation to that payment
need be set out only once.
13A Unforeseen
significant capital expenditure
13A.1 Whether the franchisor will require the franchisee,
through the franchise agreement, the operations manual (or equivalent), or any
other means, to undertake unforeseen significant capital expenditure that was
not disclosed by the franchisor before the franchisee entered into the
franchise agreement.
13B Costs
of dispute resolution
13B.1 Whether the franchisor will attribute the franchisor’s
costs, including legal costs, incurred in dispute resolution, to the
franchisee.
14 Financing
14.1 The material conditions of each financing arrangement
that the franchisor, its agent or an associate of the franchisor offers to the
franchisee for establishment or operation of the franchised business.
14.2 For item 14.1, the material conditions of a financing
arrangement include the following:
(a) any requirement that the franchisee must
provide a minimum amount of unborrowed working capital for the franchised
business;
(b) any requirement that a franchisee must meet a
stated debt to equity ratio in relation to the franchised business.
15 Franchisor’s
obligations
15.1 References to the relevant conditions of the attached
franchise agreement that deal with obligations of the franchisor, including:
(a) any obligation to provide training:
(i) before the franchised business
starts; and
(ii) during operation of the franchised
business; and
(b) any obligation that continues after the
franchised business ceases to operate.
16 Franchisee’s
obligations
16.1 References to the relevant conditions of the franchise
agreement that deal with obligations of a franchisee for the following matters:
(a) selection and acquisition of site and
premises;
(b) requirements for starting the franchised
business;
(c) development of the site, premises, vehicles
and equipment;
(d) training:
(i) before the franchised business
starts; and
(ii) during operation of the franchised
business;
(e) opening the franchised business;
(f) complying with standards or operations
manuals;
(h) warranties and customer service;
(i) territorial development and minimum
performance criteria;
(j) maintenance and appearance of site, premises,
vehicles and equipment;
(k) insurance;
(l) marketing;
(m) indemnities and guarantees;
(n) participation requirements for the
franchisee or its directors, management or employees;
(o) records and reports;
(p) inspections and audit.
17 Other
conditions of agreement
17.1 References to the
relevant conditions of the franchise agreement that deal with the following
matters:
(a) term of the franchise agreement;
(b) variation;
(c) renewal, extension or extension of the scope;
(d) conditions the franchisee must meet to renew,
extend or extend the scope of the franchise agreement;
(e) termination by the franchisor;
(f) termination by the franchisee;
(g) the franchisee’s goodwill, if any, on
termination or expiry;
(h) the franchisee’s obligations when a
franchise agreement is terminated, expires or is not renewed;
(i) the franchisor’s rights to sell its
business;
(j) transfer of a franchise;
(k) mediation;
(l) option or right of first refusal, if any,
for the franchisor to buy the franchised business;
(m) the franchisor’s rights, if any, to inspect
financial and other records of the franchised business;
(n) confidentiality of the franchisee’s records;
(o) death or disability of the franchisee or a
director or shareholder of the franchisee;
(p) details of the operation or establishment of
any franchisee representative body, eg Franchise Advisory Council;
(q) restrictions on the franchisee’s operation of
other businesses during or after the term of the franchise agreement;
(r) operations manual;
(s) choice of governing law.
17A Unilateral
variation of franchise agreement
17A.1 If a franchise agreement is entered into in a financial
year commencing on 1 July 2011, 1 July 2012 or 1 July 2013 — the
circumstances in which the franchisor has unilaterally varied a franchise
agreement since 1 July 2010.
17A.2 If a franchise agreement is entered into in a financial
year commencing after 1 July 2013 — the circumstances in which the
franchisor has unilaterally varied a franchise agreement in the last 3
financial years.
17A.3 The circumstances in which the franchise agreement may
be varied, unilaterally, by the franchisor in the future.
17B Confidentiality
obligations
17B.1 Whether a confidentiality obligation will be imposed by
the franchisor on the franchisee.
17B.2 If a confidentiality obligation is to be imposed on
the franchisee, details of the matters that the obligation may cover, including
the following:
(a) outcomes of mediation;
(b) settlements;
(c) intellectual property;
(d) trade secrets;
(e) particular aspects of individual agreements,
such as fees.
17C Arrangements
to apply at the end of the franchise agreement
17C.1 Details of the process that will apply in determining
arrangements to apply at the end of the franchise agreement, including:
(a) whether the prospective franchisee will have
any options to renew, or extend, or extend the scope of the franchise agreement
or enter into a new franchise agreement and, if so, the processes the
franchisors will use to determine whether to renew, extend, or extend the scope
of the franchise agreement or enter into a new franchise agreement; and
(b) whether the prospective franchisee will be
entitled to an exit payment at the end of the franchise agreement and, if so,
how the exit payment will be determined or earned; and
(c) details of the arrangements that will apply
to unsold stock, marketing material, equipment and other assets purchased when
the franchise agreement was entered into, including:
(i) whether the franchisor will
purchase the stock, marketing material, equipment and other assets; and
(ii) if the franchisor is to purchase
the stock, marketing material, equipment and other assets — how prices
will be determined; and
(d) whether the prospective franchisee will have
the right to sell the business at the end of the franchise agreement; and
(e) if the prospective franchisee will have the
right to sell the business at the end of the franchise agreement — whether
the franchisor will have first right of refusal, and how market value will be
determined; and
(f) whether the franchisor will consider any
significant capital expenditure undertaken by the franchisee during the
franchise agreement, in determining the arrangements to apply at the end of the
franchise agreement.
17C.2 If a franchise agreement is entered into in a financial
year commencing on 1 July 2011, 1 July 2012 or 1 July 2013 — details of
whether the franchisor has, since 1 July 2010, considered any significant
capital expenditure undertaken by franchisees, in determining the arrangements to
apply at the end of franchise agreements between the franchisor and those
franchisees.
17C.3 If a franchise agreement is entered into in a financial
year commencing after 1 July 2013 — details of whether the franchisor has,
in the last 3 financial years, considered any significant capital expenditure
undertaken by franchisees, in determining the arrangements to apply at the end
of franchise agreements between the franchisor and those franchisees.
17D Amendment
of franchise agreement on transfer or novation of franchise
17D.1 Whether the franchisor will amend (or require the
amendment of) the franchise agreement on or before the transfer or novation of
the franchise.
18 Obligation
to sign related agreements
18.1 Summary of any requirements under the franchise
agreement for the franchisee or directors, shareholders, beneficiaries, owners
or partners of the franchisee to enter into any of the following agreements:
(a) a lease, sublease, licence or other
agreement under which the franchisee can occupy the premises of the franchised
business;
(b) a chattel lease or hire purchase agreement;
(ba) an agreement under which the franchisee gains
ownership of, or is authorised to use, any intellectual property;
(c) a security agreement, including a guarantee,
mortgage, security deposit, indemnity, loan agreement or obligation to provide
a bank guarantee to a third party;
(d) a confidentiality agreement;
(e) an agreement not to carry on business within
an area or for a time after the franchise agreement is terminated.
18.2 All documents mentioned in item 18.1 must be provided
to the franchisee:
(a) at least 14 days before the day on which the
franchise agreement is signed, if they are available at that time; or
(b) if they are not available at that time —
when they become available.
19 Earnings
information
19.1 Earnings information for the franchise, if it is
given, must be based on reasonable grounds.
19.2 Earnings information may be given in a separate
document attached to the disclosure document.
19.3 Earnings information includes information from which
historical or future financial details of a franchise can be assessed.
19.4 If earnings information
is not given — the following statement:
The
franchisor does not give earnings information about a [insert type of
franchise] franchise.
Earnings may vary between franchises.
The franchisor cannot estimate earnings for
a particular franchise.
19.5 Earnings information that is a projection or forecast
must include the following details:
(a) the facts and assumptions on which the
projection or forecast is based;
(b) the extent of enquiries and research
undertaken by the franchisor and any other compiler of the projection or
forecast;
(c) the period to which the projection or
forecast relates;
(d) an explanation of the choice of the period
covered by the projection or forecast;
(e) whether the projection or forecast includes
depreciation, salary for the franchisee and the cost of servicing loans;
(f) assumptions about interest and tax.
20 Financial
details
20.1 A statement as at the end of the last financial year,
signed by at least 1 director of the franchisor, whether in its directors’
opinion there are reasonable grounds to believe that the franchisor will be
able to pay its debts as and when they fall due.
20.2 Financial reports for each of the last 2 completed
financial years in accordance with sections 295 to 297 of the Corporations
Act 2001, or a foreign equivalent of that Act applicable to the franchisor,
prepared by the franchisor.
20.2A If:
(a) the franchisor is part of a consolidated
entity that is required to provide audited financial reports under the Corporations
Act 2001, or a foreign equivalent of that Act applicable to the
consolidated entity; and
(b) a franchisee
requests those financial reports;
financial reports for each of the last 2 completed financial years,
prepared by the consolidated entity.
20.3 Items 20.2 and 20.2A do
not apply if:
(a) the statement under item 20.1 is supported
by an independent audit provided by:
(i) a registered company auditor; or
(ii) if the franchisor is a foreign
franchisor — a foreign equivalent for that franchisor;
within 12 months after the end of the
financial year to which the statement relates; and
(b) a copy of the independent audit is provided
with the statement under item 20.1.
21 Updates
21.1 Any information given under clause 18 of the code that
has changed between the date of the disclosure document and the date the
disclosure document is given under the code.
22 Other
relevant disclosure information
22.1 A copy of the franchise
agreement, in the form in which it is to be executed, must be attached.
22.2 Copy of the code must be attached.
22.3 Any other information that:
(a) the franchisor wants to give; and
(b) does not contradict information required to
be given.
23 Receipt
23.1 On the last page of the disclosure document:
(a) a statement to the effect that the
prospective franchisee may keep the disclosure document; and
(b) a form on which the prospective franchisee
can acknowledge receipt of the disclosure document.
Annexure 2 Short form disclosure document for franchisee or
prospective franchisee
(subclause 6 (2))
1 First
page
1.1 On the first page:
(a) in bold upper case:
SHORT FORM DISCLOSURE DOCUMENT FOR
FRANCHISEE OR PROSPECTIVE FRANCHISEE; and
(b) the franchisor’s:
(i) name; and
(ii) business address and phone number;
and
(iii) ABN, ACN or ARBN (or foreign
equivalent if the franchisor is a foreign franchisor); and
(c) the signature of the franchisor, or of a
director, officer or authorised agent of the franchisor; and
(d) the preparation date of the
disclosure document; and
(e) the following statement:
This disclosure document contains some of
the information you need in order to make an informed decision about whether to
enter into a franchise agreement.
Entering into a franchise agreement is a
serious undertaking. Franchising is a business and, like any business, the
franchise (or franchisor) could fail during the franchise term. This could have
consequences for the franchisee.
A franchise agreement is legally binding on
you if you sign it.
You are entitled to a waiting period of 14
days before you enter into this agreement.
If this is a new franchise agreement (not a
renewal, extension, extension of the scope or transfer of an agreement), you
will be entitled to a 7 day ‘cooling off’ period after signing the agreement,
during which you may terminate the agreement.
If you
decide to terminate the agreement during the cooling off period, the franchisor
must, within 14 days, return all payments (whether of money or of other
valuable consideration) made by you to the franchisor under the agreement.
However, the franchisor may deduct from this amount the franchisor’s reasonable
expenses, if the expenses or their method of calculation have been set out in
the agreement.
Take your time, read all the documents
carefully, talk to other franchisees and assess your own financial resources
and capabilities to deal with the requirements of the franchised business.
You should make your own enquiries about
the franchise and about the business of the franchise.
You should get independent legal,
accounting and business advice before signing the franchise agreement.
It is often prudent to prepare a business
plan and projections for profit and cash flow.
You should also consider educational
courses, particularly if you have not operated a business before.
2 Franchisor
details
2.1 The franchisor’s:
(a) name; and
(b) address, or addresses, of registered office
and principal place of business in Australia; and
(c) ABN, ACN or ARBN (or foreign equivalent if
the franchisor is a foreign franchisor).
2.2 The name under which the franchisor carries on
business in Australia relevant to the franchise.
2.3 A description of the kind of business operated under
the franchise.
2.4 The name, ABN, ACN or ARBN, address of registered
office and principal place of business of each associate of the franchisor that
is a body corporate (if any).
2.5 The name and address of each associate of the
franchisor that is not a body corporate (if any).
2.6 For each officer of the franchisor — name,
position held and qualifications (if any).
3 Litigation
3.1 Details of:
(a) current proceedings by a public agency,
criminal or civil proceedings or arbitration, relevant to the franchise,
against the franchisor or a franchisor director in Australia alleging:
(i) breach of a franchise agreement;
or
(ii) contravention of trade practices
law; or
(iii) contravention of the Corporations
Act 2001; or
(iv) unconscionable conduct; or
(v) misconduct; or
(vi) an offence of dishonesty; and
(b) proceedings against the franchisor under:
(i) section 127A or 127B of the Workplace Relations Act 1996;
or
(ii) section 106 of the Industrial
Relations Act 1996 of New South Wales;
or
(iii) section 276 of the Industrial
Relations Act 1999 of Queensland.
3.2 Whether the franchisor or a director
of the franchisor has been:
(a) in the last 10 years — convicted of a
serious offence, or an equivalent offence outside Australia; or
(b) in the last 5 years — subject to final
judgment in civil proceedings for a matter mentioned in paragraph 3.1 (a);
or
(c) in the last 10 years — bankrupt,
insolvent under administration or an externally‑administered body
corporate in Australia or elsewhere.
3.3 For items 3.1 and
3.2 — the following details (where relevant):
(a) the names of
the parties to the proceedings;
(b) the name of the court, tribunal or
arbitrator;
(c) the case number;
(d) the general nature of the proceedings;
(e) the current status of the proceedings;
(f) the date of order or undertaking under
section 87B of the Act;
(g) the penalty or damages assessed or imposed;
(h) the names of the persons who are bankrupt,
insolvent under administration or externally administered;
(i) the period of the bankruptcy, insolvency
under administration or external administration.
4 Intellectual
property
4.1 For any trade mark used to identify, and for any
patent, design or copyright that is material to, the franchise system (intellectual
property):
(a) description of the intellectual property;
and
(b) details of the franchisee’s rights and
obligations in connection with the use of the intellectual property; and
(c) whether the intellectual property is
registered in Australia, and if so, the registration date, registration number
and place of registration; and
(d) any judgment or pending proceedings that
could significantly affect ownership or use of the intellectual property,
including:
(i) name of court or tribunal; and
(ii) matter number; and
(iii) summary of the claim or judgment;
and
(e) if the
intellectual property is not owned by the franchisor — who owns it; and
(f) details of any agreement that significantly
affects the franchisor’s rights to use, or to give others the right to use, the
intellectual property, including:
(i) parties to the agreement; and
(ii) nature and extent of any
limitation; and
(iii) duration of the agreement; and
(iv) conditions under which the
agreement may be terminated.
4.2 The franchisor is taken to comply with item 4.1 for
any information that is confidential if the franchisor gives:
(a) a general description of the subject matter;
and
(b) a summary of conditions for use by the
franchisee.
5 Franchise
site or territory
5.1 Whether the franchise is:
(a) for an exclusive or non‑exclusive
territory; or
(b) limited to a particular site.
5.2 For the territory of the franchise:
(a) whether other franchisees may operate a
business that is substantially the same as the franchised business; and
(b) whether the franchisor or an associate of the
franchisor may operate a business that is substantially the same as the
franchised business; and
(c) whether the franchisor or an associate of
the franchisor may establish other franchises that are substantially the same
as the franchise; and
(d) whether the franchisee may operate a business
that is substantially the same as the franchised business outside the territory
of the franchise; and
(e) whether the franchisor may change the
territory of the franchise.
6 Marketing
or other cooperative funds
6.1 For each marketing or other cooperative fund,
controlled or administered by or for the franchisor, to which the franchisee
may be required to contribute, the following details:
(a) the kinds of persons who contribute to the
fund (for example, franchisee, franchisor, outside supplier);
(b) whether the
franchisor must contribute to the fund in relation to businesses owned or
operated by the franchisor that are substantially the same as the franchised
business and, if so, whether the contribution is worked out in the same way as
for a franchisee;
(c) how much the franchisee must contribute to
the fund and whether other franchisees must contribute at a different rate;
(d) who controls or administers the fund;
(e) whether the fund is audited and, if so, by
whom and when;
(f) whether the fund’s financial statements can
be inspected by, or will be given to, franchisees;
(g) the kinds of expense for which the fund may
be used;
(h) the fund’s expenses for the last financial
year, including the percentage spent on production, advertising, administration
and other stated expenses;
(i) whether the franchisor or its associates
supply goods or services for which the fund pays and, if so, details of the
goods or services;
(j) whether the franchisor must spend part of
the fund on marketing, advertising or promoting the franchisee’s business.
7 Payments
Prepayments
7.1 If the franchisor requires a payment before the
franchise agreement is entered into — why the money is required, how the
money is to be applied and who will hold the money.
7.2 The conditions under which a payment will be
refunded.
Establishment costs
7.3 Details of the range
of costs to start operating the franchised business, based on current practice,
for the following matters:
(a) real property, including property type,
location and building size;
(b) equipment, fixtures, other fixed assets,
construction, remodelling, leasehold improvements and decorating costs;
(c) inventory required to begin operation;
(d) security deposits, utility deposits, business
licences, insurance and other prepaid expenses;
(e) additional funds, including working capital,
required by the franchisee before operations begin;
(f) other payments by a franchisee to begin
operations.
7.4 For item 7.3, the details for each payment must
include:
(a) description of the payment; and
(b) amount of the payment or the formula used to
work out the payment; and
(c) to whom the payment is made; and
(d) when the payment is due; and
(e) whether the payment is refundable and, if
so, under what conditions.
7.5 For item 7.4, if the amount of the payment cannot
easily be worked out — the upper and lower limits of the amount.
Other payments
7.6 For each recurring or isolated payment payable by the
franchisee to the franchisor or an associate of the franchisor or to be
collected by the franchisor or an associate of the franchisor for another
person:
(a) description of the payment; and
(b) amount of the payment or formula used to work
out the payment; and
(c) to whom the payment is made; and
(d) when the payment is due; and
(e) whether the payment is refundable and, if
so, under what conditions.
7.6A For each recurring or isolated payment, that is within
the knowledge or control of the franchisor or is reasonably foreseeable by the
franchisor, that is payable by the franchisee to a person other than the
franchisor or an associate of the franchisor:
(a) description of the payment; and
(b) amount of the payment or formula used to work
out the payment; and
(c) to whom the payment is made; and
(d) when the payment is due; and
(e) whether the payment is refundable and, if
so, under what conditions.
7.7 For item 7.6 or 7.6A, if the amount of the payment
cannot easily be worked out — the upper and lower limits of the amount.
7.8 If 2 or more of items 7.1, 7.3 and 7.6 apply to a
payment, the information required by those items in relation to that payment
need be set out only once.
7A Unforeseen
significant capital expenditure
7A.1 Whether the franchisor will require the franchisee,
through the franchise agreement, the operations manual (or equivalent), or any
other means, to undertake unforeseen significant capital expenditure that was
not disclosed by the franchisor before the franchisee entered into the
franchise agreement.
7B Costs
of dispute resolution
7B.1 Whether the franchisor will attribute the franchisor’s
costs, including legal costs, incurred in dispute resolution, to the
franchisee.
8 Franchisor’s
obligations
8.1 References to the relevant conditions of the attached
franchise agreement that deal with obligations of the franchisor, including:
(a) any obligation to provide training:
(i) before the franchised business
starts; and
(ii) during operation of the franchised
business; and
(b) any obligation that continues after the
franchised business ceases to operate.
9 Franchisee’s
obligations
9.1 References to the relevant conditions of the
franchise agreement that deal with obligations for a franchisee for the
following matters:
(a) selection and acquisition of site and
premises;
(b) requirements for starting the franchised
business;
(c) development of the site, premises, vehicles
and equipment;
(d) training:
(i) before the franchised business
starts; and
(ii) during operation of the franchised
business;
(e) opening the franchised business;
(f) complying with standards or operations
manuals;
(g) warranties and customer service;
(h) territorial development and minimum
performance criteria;
(i) maintenance and appearance of site, premises,
vehicles and equipment;
(j) insurance;
(k) marketing;
(l) indemnities and guarantees;
(m) participation requirements for the franchisee
or its directors, management or employees;
(n) records and reports;
(o) inspections and audit.
9A Unilateral
variation of franchise agreement
9A.1 If a franchise agreement is entered into in a
financial year commencing on 1 July 2011, 1 July 2012 or 1 July 2013 — the
circumstances in which the franchisor has unilaterally varied a franchise agreement
since 1 July 2010.
9A.2 If a franchise agreement is entered into in a
financial year commencing after 1 July 2013 — the circumstances in which
the franchisor has unilaterally varied a franchise agreement in the last 3
financial years.
9A.3 The circumstances in which the franchise agreement may
be varied, unilaterally, by the franchisor in the future.
9B Confidentiality
obligations
9B.1 Whether a confidentiality obligation will be imposed
by the franchisor on the franchisee.
9B.2 If a confidentiality obligation is to be imposed on
the franchisee, details of the matters that the obligation may cover, including
the following:
(a) outcomes of mediation;
(b) settlements;
(c) intellectual property;
(d) trade secrets;
(e) particular aspects of individual agreements,
such as fees.
9C Arrangements
to apply at the end of the franchise agreement
9C.1 Details of the process that will apply in determining
arrangements to apply at the end of the franchise agreement, including:
(a) whether the prospective franchisee will have
any options to renew, extend, or extend the scope of the franchise agreement or
enter into a new franchise agreement and, if so, the processes the franchisors
will use to determine whether to renew, extend, or extend the scope of the
franchise agreement or enter into a new franchise agreement; and
(b) whether the prospective franchisee will be
entitled to an exit payment at the end of the franchise agreement and, if so,
how the exit payment will be determined or earned; and
(c) details of the arrangements that will apply
to unsold stock, marketing material, equipment and other assets purchased when
the franchise agreement was entered into, including:
(i) whether the franchisor will
purchase the stock, marketing material, equipment and other assets; and
(ii) if the franchisor is to purchase
the stock, marketing material, equipment and other assets — how prices
will be determined; and
(d) whether the prospective franchisee will have
the right to sell the business at the end of the franchise agreement; and
(e) if the prospective franchisee will have the
right to sell the business at the end of the franchise agreement — whether
the franchisor will have first right of refusal, and how market value will be
determined; and
(f) whether the franchisor will consider any
significant capital expenditure undertaken by the franchisee during the
franchise agreement, in determining the arrangements to apply at the end of the
franchise agreement.
9C.2 If a franchise agreement is entered into in a
financial year commencing on 1 July 2011, 1 July 2012 or 1 July 2013 —
details of whether the franchisor has, since 1 July 2010, considered any
significant capital expenditure undertaken by franchisees, in determining the
arrangements to apply at the end of franchise agreements between the franchisor
and those franchisees.
9C.3 If a franchise agreement is entered into in a
financial year commencing after 1 July 2013 — details of whether the
franchisor has, in the last 3 financial years, considered any significant
capital expenditure undertaken by franchisees, in determining the arrangements
to apply at the end of franchise agreements between the franchisor and those
franchisees.
9D Amendment
of franchise agreement on transfer or novation of franchise
9D.1 Whether the franchisor will amend (or require the
amendment of) the franchise agreement on or before transfer or novation of the
franchise.
10 Financial
details
10.1 A statement as at the end of the last financial year,
signed by at least 1 director of the franchisor, whether in its directors’
opinion there are reasonable grounds to believe that the franchisor will be
able to pay its debts as and when they fall due.
10.2 Financial reports for each of the last 2 completed
financial years in accordance with sections 295 to 297 of the Corporations
Act 2001, or a foreign equivalent of that Act applicable to the franchisor,
prepared by the franchisor.
10.3 If:
(a) the franchisor is part of a consolidated
entity that is required to provide audited financial reports under the Corporations
Act 2001, or a foreign equivalent of that Act applicable to the
consolidated entity; and
(b) a franchisee requests those financial reports;
financial reports for each of the last 2 completed financial years,
prepared by the consolidated entity.
10.4 Items 10.2 and 10.3 do not apply if:
(a) the statement under item 10.1 is supported
by an independent audit provided by:
(i) a registered company auditor; or
(ii) if the franchisor is a foreign
franchisor — a foreign equivalent for that franchisor;
within 12 months after the end of the
financial year to which the statement relates; and
(b) a copy of the independent audit is provided
with the statement under item 10.1.
11 Other
relevant disclosure information
11.1 A copy of the franchise agreement, in the form in
which it is to be executed, must be attached.
11.2 A copy of the code must be attached.
11.3 Any other information that:
(a) the franchisor wants to give; and
(b) does not contradict information required to
be given.
12 Receipt
12.1 On the last page of the disclosure document:
(a) a statement to the effect that the
prospective franchisee may:
(i) keep the disclosure document; and
(ii) ask the franchisor for the
information referred to in the following sections of Annexure 1:
·
section 3 — Business experience
·
section 5 — Payments to agents
·
section 6 — Existing franchises
·
section 9 — Supply of goods or services to a franchisee
·
section 10 — Supply of goods or services by a
franchisee
·
section 11 — Sites or Territories
·
section 14 — Financing
·
section 17 — Summary of other conditions of agreement
·
section 18 — Obligation to sign related agreements
·
section 19 — Earnings information
·
section 21 — Updates
·
section 22 — Other relevant disclosure information; and
(b) a form on which the prospective franchisee
can acknowledge receipt of the disclosure document.