TRADE PRACTICES (INDUSTRY CODESÑFRANCHISING) REGULATIONS 1998 1998 No. 162 - SCHEDULE
TRADE PRACTICES (INDUSTRY CODESÑFRANCHISING) REGULATIONS 1998 1998 No. 162 - SCHEDULE
SCHEDULE Regulation 3
FRANCHISING CODE OF CONDUCT
PART 1ÑPRELIMINARY 1. Name of code This code is the Franchising Code of
Conduct. 2. Purpose of code The purpose of this code is to regulate the
conduct of participants in franchising towards other participants in
franchising. 3. Definitions (1) In this code: associate, for a franchisor,
means a person:
(a) who:
(i) is a director or related body corporate, or a director of a
related body corporate, of the franchisor; or
(ii) for a franchisor that is a proprietary companyÑdirectly or
indirectly owns, controls, or holds with power to vote, at
least 15 per cent of the issued voting shares in the
franchisor; or
(iii) is a partner of the franchisor; and
(b) whose relationship to the franchisor is relevant to the franchise
system, including supplying goods or services to a franchisee.
disclosure document means:
(a) for the grant, renewal or extension of a franchiseÑa document that
contains the information mentioned in Annexure 1; or
(b) for the transfer of a franchise or a franchised businessÑa document
that contains the information mentioned in Annexure 2. franchise
includes the following:
(a) the rights and obligations under a franchise agreement;
(b) a master franchise;
(c) a subfranchise;
(d) an interest in a franchise. franchisee includes the following:
(a) a person to whom a franchise is granted;
(b) a person who otherwise participates in a franchise as a franchisee;
(c) a subfranchisor in its relationship with a franchisor;
(d) a subfranchisee in its relationship with a subfranchisor. franchise
system includes a business system in which a franchisor grants a
franchise to a franchisee. franchisor includes the following:
(a) a person who grants a franchise;
(b) a person who otherwise participates in a franchise as a franchisor;
(c) a subfranchisor in its relationship with a subfranchisee. interest in
a franchise includes a legal or beneficial interest in:
(a) a franchise agreement or a franchised business; or
(b) shares or voting rights in a corporation, not being a listed
corporation that owns a franchised business; or
(c) units or voting rights in a unit or other trust, controlled by a
trustee, that owns a franchised business; or
(d) the capital or income of a partnership that owns a franchised
business. master franchise means a franchise in which the franchisor
grants to a subfranchisor the right:
(a) to grant a subfranchise; or
(b) to participate in a subfranchise. prospective franchisee means a
person who deals with a franchisor for the right to be granted a
franchise. serious offence means an offence under any law of the
Commonwealth or a State or a Territory for which, if the act or
omission had taken place in the Jervis Bay Territory, a person would
be liable, on first conviction, to imprisonment for a period of not
less than 5 years. Note Jervis Bay Territory is mentioned because it
is a jurisdiction in which the Commonwealth has control over the
criminal law. supply see subsection 4 (1) of the Act. Note 1 Under
subsection 4 (1) of the Act, supply, when used as a verb, includes:
(a) for goodsÑsupply (including re-supply) by way of sale, exchange,
lease, hire or hire-purchase; and
(b) for servicesÑprovide, grant or confer; and, when used as a noun, has a
corresponding meaning. Note 2 the Act means the
Trade Practices Act 1974 (see the Trade Practices Regulations, r 2
(1)). trade mark has the meaning given by the Trade Marks Act 1995.
Note A trade mark is a sign (including any letter, word, name,
signature, numeral, device, brand, heading, label, ticket, aspect of
packaging, shape, colour, sound or scent (or any combination of
these)) used, or intended to be used, to distinguish goods or services
dealt with or provided in the course of trade by a person from goods
or services so dealt with or provided by any other person (see
Trade Marks Act 1995 , s 17). transfer, for a franchise, includes an
arrangement in which the franchise is granted, transferred or sold.
(2) In this code, the following terms have the meanings given by the
Corporations Law: accounting standard ACN ARBN body corporate director
executive officer externally-administered body corporate insolvent
under administration listed corporation misconduct officer proprietary
company registered company auditor registered office related body
corporate secretary small proprietary company. 4. 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 or services at or below their wholesale
price; or
(vi) repayment by the franchisee of a loan from the franchisor; or
(vii) payment for the wholesale price of 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 or extension of a franchise agreement;
(b) a motor vehicle dealership agreement. (3) However, any of the
following do not in themselves 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. 5.
Application (1) This code applies to a franchise agreement
entered into on or after 1 October 1998. (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) applies 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) if the franchisor:
(i) is resident, domiciled or incorporated outside Australia; and
(ii) grants only 1 franchise or master franchise to be operated in
Australia; or
(b) to which another mandatory industry code, prescribed under section
51AE of the Act, applies; or
(c) 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) (c) 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
2ÑDISCLOSURE Division 2.1ÑDisclosure document 6. Requirement to give
disclosure document (1) A franchisor must give a disclosure document
under Annexure 1 to:
(a) a prospective franchisee; or
(b) a franchisee proposing to renew or extend a franchise. (2) A person
who proposes to transfer a franchise or a franchised business must
give a disclosure document under Annexure 2 to the proposed
transferee. (3) However, a proposed transferee who is the franchisor
may waive this requirement. (4) If a subfranchisor proposes to grant a
subfranchise:
(a) the franchisor and subfranchisor must either:
(i) individually give a disclosure document to the franchisee or
prospective franchisee; or
(ii) give to the franchisee or prospective franchisee 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. (5) If a franchisor proposes to grant a
master franchise, the franchisor must give a disclosure document under
Annexure 1 to the prospective subfranchisor. Note This does not apply
to a franchise agreement to which paragraph 5 (3) (a) applies. 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 2.2ÑBefore franchise agreement 8. Application This
Division applies to a disclosure document under Annexure 1 for:
(a) a prospective franchisee; or
(b) a franchisee proposing to enter into, renew or extend a franchise
agreement. 9. Purpose and content of disclosure document (1) The
purpose of a disclosure document under Annexure 1 is to give to a
prospective franchisee, or a franchisee proposing to enter into, renew
or extend a franchise agreement, information from the franchisor to
help the franchisee or prospective franchisee to make a reasonably
informed decision about the franchise. (2) A disclosure document:
(a) must include the information mentioned in Annexure 1; and
(b) may include additional information under the heading "Other relevant
disclosure information"; and
(c) must be signed by a director or an executive officer of the
franchisor. (3) A franchisor must update its disclosure document
annually within 3 months after the end of each financial year of the
franchisor. 10. Franchisor obligations A franchisor must give a copy
of this code and a disclosure document in the form set out in Annexure
1:
(a) to 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) pays non-refundable money to the franchisor or an associate of
the franchisor in connection with the proposed franchise
agreement; or
(b) to a franchisee at least 14 days before renewal or extension of the
franchise agreement. 11. Advice before entering into franchise
agreement (1) The franchisor must not:
(a) enter into, renew or extend a franchise agreement; or
(b) enter into an agreement to enter into, renew or extend a franchise
agreement; or
(c) receive non-refundable money 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 or extension of a franchise agreement;
and
(b) does not prevent a franchisor from requiring any or all of the
statements mentioned in paragraph (2) (a). Division 2.3ÑTransfer of
franchised business 12. Disclosure document for proposed transferee
(1) A person who proposes to transfer a franchised business must give
to the proposed transferee a disclosure document under Annexure 2. (2)
However, a proposed transferee who is the franchisor may waive this
requirement.
PART 3ÑCONDITIONS 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) paying any money under the agreement. (2) Subclause (1) does not apply
to the renewal, extension or transfer of an existing franchise
agreement. (3) If the franchisee terminates an agreement under
subclause (1), the franchisor must, within 14 days, repay all money
paid by the franchisee to the franchisor under the agreement. (4)
However, the franchisor may deduct from the amount paid under
subclause (1) 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)Ñthe 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 A franchisor must not induce a franchisee not to form an
association or not to associate with other franchisees for a lawful
purpose. 16. Prohibition on general release from liability (1) A
franchise agreement entered into on or after 1 October 1998 must not
contain, or require a franchisee to sign, a general release of the
franchisor from liability towards the franchisee. (2) However,
subclause (1) does 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 3 months after the end of the last financial year, prepare an
annual financial statement of the fund's receipts and expenses for the
last financial year, including the amount spent on production,
advertising, administration, goods or services supplied by the
franchisor or an associate of the franchisor and other stated
expenses; and
(b) have the statement audited by a registered company auditor within 3
months after the end of the financial year to which it relates; and
(c) if the franchisee asks for a copy of the statementÑgive a copy of the
statement to the franchisee within 30 days after the request. (2)
However, a franchisor does not have to comply with paragraph (1) (b)
for the financial year if 75% of the franchisor's franchisees in
Australia, who contribute to the fund, agree. 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 it within a reasonable
time (but not more than 60 days) after the franchisor becomes aware of
it. (2) For subclause (1), the matters are:
(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 in
Australia alleging:
(i) breach of a franchise agreement; or
(ii) contravention of trade practices law; or
(iii) contravention of the Corporations Law; 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) 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 290 of the Workplace Relations Act 1997 of Queensland;
(d) civil proceedings in Australia against the franchisor by 10% or 10 of
the franchisees in Australia of the franchisor (whichever is the
lower);
(e) any judgment that is entered against the franchisor, and is not
discharged within 28 days, for at least:
(i) for a small proprietary companyÑ$100,000; or
(ii) for any other companyÑ$1,000,000;
(f) any judgment that is entered against the franchisor in a matter
mentioned in paragraph 4.2 (a) of the disclosure document;
(g) the franchisor becoming an externally-administered body corporate. (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. 19. Current disclosure
document (1) A franchisor must give to a franchisee a current
disclosure document under Annexure 1 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 of the franchise (1)
A request for a franchisor's consent to transfer of a franchise must
be made in writing. (2) A franchisor must not unreasonably withhold
consent to the transfer. (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 of a franchise; or
(c) the proposed transferee has not met the selection criteria of the
franchisor; or
(d) agreement to the transfer will have a significantly adverse effect on
the franchise system; or
(e) the disclosure obligations under clause 12 have not been met; 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 if the franchisor does not, within 42 days after the
request was made, give to the franchisee written notice:
(i) that consent is withheld; and
(ii) setting out why consent is withheld. 21. TerminationÑbreach 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.
TerminationÑno breach by franchisee (1) This clause applies if a
franchisor terminates a franchise agreement:
(a) before it expires; and
(b) without the consent of the franchisee; and
(c) if the franchisee has not breached the franchise agreement; and
(d) clause 23 does not apply. (2) For paragraph (1) (b), 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. TerminationÑspecial 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.
PART 4ÑRESOLVING 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) The mediator may decide the time and place
for mediation. (6) The parties must attend the mediation and try to
resolve the dispute. 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. 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.
ANNEXURE 1 Subclause 6 (1)
Disclosure document for franchisee or prospective franchisee 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 name, ACN or ARBN, business address and phone number;
and
(c) the date of the disclosure document; and
(d) the following statement: and
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.
A franchise agreement is legally binding on you if you sign it.
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 name,
ACN or ARBN, address of registered office and principal place of business in
Australia. 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, 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
director, secretary, executive officer, or partner of the franchisor who is
likely to have management responsibilities for the franchisor's business
operations in relation to the franchiseÑname, position held and qualifications
(if any). 3. Business experience 3.1 A summary of the business experience in
the last 10 years of each person, other than an executive officer, 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 in
Australia alleging:
(i) breach of a franchise agreement; or
(ii) contravention of trade practices law; or
(iii) contravention of the Corporations Law; 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 290 of the Workplace Relations Act 1997 of Queensland.
4.2 Whether the franchisor or a director of the franchisor has
been:
(a) in the last 10 yearsÑconvicted of a serious offence, or an equivalent
offence outside Australia; or
(b) in the last 5 yearsÑsubject to final judgment in civil proceedings for
a matter mentioned in paragraph 4.1 (a); or
(c) in the last 10 yearsÑbankrupt, insolvent under administration or an
externally-administered body corporate in Australia or elsewhere. 4.3
For items 4.1 and 4.2Ñthe 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. 5. Payments to agents 5.1 For any
agreement under which the franchisor must pay an amount to a
person who is not an officer, director or employee of the
franchisor in connection with the introduction or recruitment
of a franchiseeÑthe name of the person. 6. Existing franchises
6.1 Number, sorted by State or Territory, 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 years and for each of the following eventsÑ
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 The franchisor is
taken to comply with item 6.4 if the franchisor supplies details as
far as the franchisor is aware that relate to events that happened
before 1 July 1998. 7. Intellectual property 7.1 For any trade mark
used to identify, and for any patent, design or copyright that is
significant and 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 franchisorÑwho 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
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 franchised territory:
(a) whether other franchisees may operate a business that is substantially
the same as the franchise; and
(b) whether the franchisor or an associate of the franchisor may operate a
business that is substantially the same as the franchise; 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 franchise outside the territory; and
(e) whether the franchisor may change the territory. 9. Supply of goods or
services to a franchisee 9.1 For the franchisor's requirements for
supply of goods or services to a franchiseeÑdetails 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; 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. 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 franchiseeÑdetails 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). 10.2 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 the franchisees, and whether any
rebates or financial benefits are shared with franchisees directly or
indirectly. 11. Sites 11.1 The policy of the franchisor or an
associate of the franchisor for selection of the site to be occupied
by the franchised business. 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 may be in a separate document and may be made
available for inspection at a time and place mentioned in 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. 12.2 The
franchisor is taken to comply with paragraph 12.1 (h) if the
franchisor supplies details as far as the franchisor is aware that
relate to expenses incurred before 1 July 1998. 13. Payments
Prepayments 13.1 If the franchisor requires a payment before the
franchise agreement is entered intoÑwhy 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 outÑthe 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.
13.7 For item 13.6, if the amount of the payment cannot easily be
worked outÑthe upper and lower limits of the amount. 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.
15. Franchisor's obligations 15.1 Summary of the conditions of the
franchise agreement that deal with obligations for a franchisor (or
references to the relevant conditions of the franchise agreement, if
attached), including providing training:
(a) before the franchised business starts; and
(b) during operation of the franchised business. 16. Franchisee's
obligations 16.1 Summary of the conditions of the franchise agreement
that deal with obligations for a franchisee (or references to the
relevant conditions of the franchise agreement, if attached) for the
following matters:
(a) site selection and acquisition;
(b) requirements for starting the franchised business;
(c) site or unit development;
(d) training before and during operating franchised business;
(e) opening the franchised business;
(f) complying with standards or operating manuals;
(g) using intellectual property;
(h) warranties and customer service;
(i) territorial development and sales quotas;
(j) maintenance and appearance of premises;
(k) insurance;
(l) marketing;
(m) indemnities;
(n) participation requirements for franchisee, directors, management or
employees;
(o) records and reports;
(p) inspections and audit. 17. Summary of other conditions of agreement
17.1 Summary of the conditions of the franchise agreement (or
references to the relevant conditions of the franchise agreement, if
attached) that deal with the following matters:
(a) term of the franchise agreement;
(b) variation;
(c) renewal or extension;
(d) conditions the franchisee must meet to renew or extend 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. 18. Obligation to sign related agreements
18.1 Summarise 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 or other agreement under which the franchisee can occupy the
premises of the franchised business;
(b) a chattel lease or hire purchase agreement;
(c) a security agreement, including a guarantee, mortgage or security
deposit;
(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. 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 givenÑthe 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 Profit and loss
statement and balance sheet of the franchisor, prepared in accordance
with accounting standards, for the last 2 years. 20.3 Item 20.2 does
not apply if the statement under item 20.1 is verified by a registered
company auditor. 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 Copy of proposed
franchise agreement may be attached. 22.2 Copy of the code may 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 documentÑa form in which the
prospective franchisee can acknowledge receipt of the disclosure
document.
ANNEXURE 2 Subclause 6 (2)
DISCLOSURE DOCUMENT FOR PROPOSED TRANSFEREE 1. Details 1.1 The franchisor's
name, ACN or ARBN, business address and telephone number. 1.2 The franchisee's
name, ACN or ARBN and business address. 1.3 Name and business or residential
address of each director of the franchisee. 1.4 A summary of the business
experience in the last 10 years of the franchisee and each person mentioned in
item 1.3, including length of experience in operating the franchised business.
1.5 Description of the franchised business and its business address. 1.6 A
copy of:
(a) the existing franchise agreement of the franchisee; and
(b) if the franchisee leases property for the franchised business and
proposes to transfer the lease to the proposed transfereeÑeach lease
or agreement to lease, or a summary of the conditions of each lease or
agreement to lease. 1.7 Details of assets of the franchised business
to be transferred to the proposed transferee. 1.8 Profit and loss
statements and balance sheets of the franchisee or the franchised
business for the last 2 years. 1.9 Summary (or references to the
relevant conditions of the franchise agreement, if attached) of
obligations, that the franchisee has in relation to the franchised
business, that are to be assumed by the proposed transferee. 1.10
Summary (or references to the relevant conditions of the franchise
agreement, if attached) of any conditions under the existing franchise
agreement for transfer of the franchise. 1.11 Details of each of the
franchisee's employees in the franchised business, including:
(a) name; and
(b) position; and
(c) length of service; and
(d) rate of pay; and
(e) outstanding obligations of the franchisee. 2. Other relevant
disclosure material 2.1 Any other information the franchisee wants to
give. 3. Disclaimer 3.1 A statement that:
(a) the information is given by the franchisee; and
(b) the franchisor does not guarantee the accuracy of the information. 4.
Receipt 4.1 On the last page of the disclosure documentÑa form in
which the proposed transferee can acknowledge receipt of the
disclosure document.
