The content and format of the Information Statement to be given to prospective franchisees and published on the Australian Competition and Consumer Commission’s (ACCC) website has been recently updated.
What has changed?
Aside from changes to the graphics contained in the Information Statement, the Information Statement now directs prospective franchisees to the Franchise Disclosure Register as a means of comparing “important information about different franchises, such as costs and contract terms“.
What does this mean for Franchisors?
The obligation to give a copy of the Information Statement has been a requirement for a number of years. However, as a result of the June 2021 Franchising Code of Conduct (Code) amendments, Franchisors are required to give a copy of the Information Statement that is published on the ACCC’s website to a prospective franchisee.
As there was no well published warning that the Information Statement was going to change, we recommend that Franchisors consider downloading the Information Statement each time a prospective franchisees makes an enquiry with the franchisor so as to ensure that the most up to date version of the Information Statement is provided to prospective franchisees. In addition, franchisors may wish to consider providing prospective franchisees with a website URL to the Information Statement on the ACCC’s website.
Failing to provide the most current version of the Information Statement could be seen by as a breach of the Code which carries a penalty.
The direction to prospective franchisees to visit the Franchise Disclosure Register is also a timely reminder to ensure that all information uploaded is accurate and up to date.
A link to the current Information Statement can be found here.
Reminder about Information Statements
The Code requires that an Information Statement must be given to a prospective franchisee as soon as practicable, and not later than 7 days, after the prospective franchisee formally applies or expresses an interest in acquiring a franchised business and before a franchisor gives the prospective franchisee disclosure documentation.
The requirement to give a copy of the Information Statement does not apply in relation to:
- the renewal of a franchise agreement*; or
- the extension of the term or scope of a franchise agreement.
*Note: the Code defines “renew” in relation to a franchise agreement, as an occurrence when the franchisee exercises an option during the term of the agreement to renew the agreement. In circumstances where the Franchisor requires a Franchisee to enter into a new franchise agreement on the Franchisor’s then current terms, consideration needs to be given whether this is a ‘renewal’ and whether an Information Statement should be provided.
If you are unsure about your obligations when onboarding new franchisees, please feel free to reach out to one of our specialist franchising advisors:
This article was written by Sean O’Donnell, Partner and Emily Lucas, Associate
