As part of a Franchisor's disclosure obligations to a prospective Franchisee or Franchisee - the Franchising Code of Conduct requires that where a Franchisor has existed for 2 or more financial years, the Franchisor is required to provide:
a statement of solvency that reflects the Franchisor’s financial position as at the end of the last financial year; and
copies of the Franchisor's financial reports (completed in accordance with sections 295 to 297 of the Corporations Act 2001) for each of the last 2 completed financial years (or an audit report prepared by a registered company auditor as to the solvency of the Franchisor).
This financial disclosure must be provided to a prospective Franchisee or Franchisee before they sign a Franchise Agreement. The financial information forms part of the Disclosure Document required under the Code.
The Australian Competition & Consumer Commission (ACCC) have powers to enforce compliance with the Franchising Code of Conduct. Any non-compliance by a Franchisor could result in the ACCC:
investigating the alleged breach of the Code
issuing infringement notices
imposing fines
seeking court-imposed financial penalties
seeking court enforceable undertakings
plus other remedies.
If you are a Franchisee and concerned your Franchisor is not making proper disclosure as required under the Code, obtain appropriate legal advice. Contact Greyson Legal | Franchise Lawyers. E: mail@greysonlegal.com