Franchisors need to amend agreements and disclosure statements reports Mills Oakley Lawyers

Franchise consultants Mills Oakley Lawyers report that the Franchising Code of Conduct has been amended with effect from 1 July 2010.

As a result of the amendments, franchisors will need to:

• review the current standard franchise agreement
• prepare a new disclosure document; and
• implement new processes in relation to the sign up of new franchises, variations, renewals and non-renewals.

Importantly, under normal situations a franchisor was able to continue to use the previous year’s disclosure document for 4 months into the new financial year, allowing time for financials to be prepared or an audit to occur.

This is not possible this year due to the changes to the Code, so as a result it will be important for franchisors to ensure that financials for the year ending the 30th of June 2010 (and an audit if necessary) are progressed as soon as possible.

Franchise consultants Mills Oakley Lawyers advise that the changes to the Code are substantive and need to be carefully implemented by franchisors to ensure that their documents and processes remain compliant.

The key changes to the Franchising Code include:

• the disclosure of end of term arrangements
• up to 6 months notice of non-renewal of franchise agreement requirements
• details about unilateral variation to franchise agreement
• details about costs in a dispute context
• disclosure of capital expenditure requirements
• details of whether confidentiality obligations will be imposed including following a mediation or settlement; and
• details of whether transfer or novation may result in a variation of the agreement.