Franchising Code of Conduct Disclosure Document Requirements: What Franchisors Must Include
- Neda Whelan (LLB, LLM, GDLP)
- 12 hours ago
- 6 min read
Introduction
Every franchise sold in Australia begins with the same legal document. Before a dollar changes hands or a franchise agreement is signed, the franchisor must give the prospective franchisee a disclosure document that meets precise content and format rules. Understanding the franchising code of conduct disclosure document requirements is not a compliance afterthought. It sits at the centre of how the Competition and Consumer (Industry Codes, Franchising) Regulations 2024 protects franchisees, and it is one of the areas where franchisors carry the most consequential civil penalty exposure in Australian commercial regulation.
The current Code commenced on 1 April 2025 and replaced the 2014 Regulation. It sets out in Schedule 1 exactly what a disclosure document must contain, and several requirements changed materially in the reforms. This guide sets out what the Code requires, what genuinely changed and what stayed the same, and the practical steps franchisors should take to keep a disclosure document compliant. It is written for franchisors, franchise system managers and advisors preparing or reviewing a disclosure document under the current Code.
Why The Franchising Code of Conduct Disclosure Document Requirements Matter Under the Franchising Code
A disclosure document exists to give a prospective franchisee the information needed to make an informed decision before committing capital, signing a lease, and often resigning from other employment. Get the content wrong, and the consequences land on the franchisor, not the franchisee.
Under section 34 of the Code, failing to disclose materially relevant facts can attract civil penalties starting at ten million dollars for corporations. Other substantive breaches of the disclosure regime attract penalties of up to 600 penalty units per contravention, and the reforms significantly increased this exposure compared to the previous Code. Beyond the financial penalties, an incomplete or non-compliant disclosure document can weaken a franchisor's position in a dispute and undermine the trust a franchise network depends on to grow. For a franchisor expanding its network, a disclosure document that is complete, current and correctly formatted under Schedule 1 is one of the highest-value compliance tasks in the business.
Key Legal Points to Understand
What a Disclosure Document Must Contain
Section 20 of the Code requires every disclosure document to follow the format and content set out in Schedule 1. In broad terms, this covers the franchisor's business background and that of its officers, including business experience and any relevant litigation or bankruptcy history. It requires details of the franchise system itself, including intellectual property and site or territory arrangements. It requires a full breakdown of establishment costs, ongoing fees and other payments, along with the terms of any supply arrangements and restrictions on where a franchisee can buy goods or services. It requires disclosure of specific purpose funds, commonly marketing or cooperative funds, including who contributes, who controls the fund, and how it is audited, and information about the circumstances in which the agreement can end, including termination, non-renewal and transfer. None of these categories are new. What has changed is the detail the Code now demands within several of them.
The 2025 Reforms to Disclosure Document Content
It is worth being precise about what genuinely changed, because not every requirement is new. The obligation to prepare a disclosure document, and its general subject matter, are long-standing features of Australian franchising regulation. The current Code removed the separate key facts sheet altogether, folding its content directly into the disclosure document rather than requiring two documents with overlapping information. From 1 November 2025, disclosure documents created after that date must also include new detail under Schedule 1 about any significant capital expenditure a franchisee may be required to undertake during the term of the agreement, including the rationale for it, and expanded information about specific purpose funds. Disclosure documents created before 1 November 2025 are not required to include the significant capital expenditure detail until they are next updated, which gives franchisors a defined transition window rather than an immediate obligation.
When the Disclosure Document Must Be Given
The 14-day rule is one of the oldest and most settled features of the Code. A franchisor must give a prospective franchisee a copy of the disclosure document at least 14 days before the franchise agreement is signed or any non-refundable payment is made. Existing franchisees can request an updated copy once every 12 months in writing, and the franchisor must provide it within two months. Separately, franchisors must update their disclosure document annually, generally within four months of the first day of their financial year, and must also update it outside that cycle whenever a significant change occurs. Where a materially relevant fact arises, such as certain legal proceedings, the franchisor's obligation to notify franchisees operates on its own timeframe rather than the annual cycle, which is a distinct duty covered in our guide to ongoing disclosure obligations under the Code.
The Solvency Statement Requirement
Every disclosure document must include information about the franchisor's solvency. This takes the form of a signed statement, given by at least one director, setting out the director's opinion on whether the franchisor will be able to pay its debts as they fall due. It must be supported by financial reports for the past two financial years or an independent audit report prepared by a registered company auditor, and different reporting applies if the franchisor was insolvent at any point in the preceding two years. This requirement gives prospective franchisees a genuine window into the financial stability of the network they are considering joining, and it is one of the more heavily scrutinised sections of any disclosure document during due diligence.
Practical Guidance for Franchisors
The practical task is less about understanding the law in the abstract and more about auditing what currently sits in the disclosure document against what Schedule 1 now requires. Start by confirming whether the document still contains a standalone key facts sheet or references to one, since that structure no longer reflects the current Code. Review the significant capital expenditure and specific purpose fund sections ahead of the 1 November 2025 transition date, even if the immediate obligation does not yet apply, so the next annual update is not a scramble.
Confirm the solvency statement is current and signed, and that supporting financial material genuinely reflects the franchisor's position rather than a figure carried over from an earlier version. Keep every disclosure document and its supporting materials for at least six years, as the Code requires regardless of whether the franchisee relationship continues. Avoid treating disclosure as a one-off task completed at system launch. A document that has not been reviewed since the franchise system was first established is one of the most common sources of exposure identified in a compliance audit, and considerably cheaper to correct before a dispute or regulatory inquiry than during one.
How Whelan Lawyers Can Help
Preparing a disclosure document that satisfies Schedule 1 requires more than a template. It requires an understanding of how the Code interacts with the franchise agreement, the specific purpose fund arrangements, and the commercial realities of the network being disclosed.
Neda Whelan brings that perspective from her time as in-house General Counsel at Jim's Group and Clark Rubber, combined with private practice experience advising franchisors on Franchising Code compliance. Whelan Lawyers works with Melbourne franchisors to review and prepare disclosure documents, close compliance gaps ahead of key transition dates, and manage the broader obligations that sit alongside them. If your disclosure document has not been reviewed against the current Code, our team is a practical next step before it becomes a problem.
Frequently Asked Questions
What is a disclosure document under the Franchising Code of Conduct?
A disclosure document is a document a franchisor must give to prospective and current franchisees, setting out prescribed information about the franchisor, the franchise system, costs and the terms of the franchise, in the format required by Schedule 1 of the Code. It must be given at least 14 days before a franchise agreement is signed.
Is the key facts sheet still required in Australia?
No. The current Code, which commenced on 1 April 2025, removed the key facts sheet as a separate document. The information it used to contain is now incorporated directly into the disclosure document itself.
How often must a franchisor update its disclosure document?
Generally within four months of the first day of the franchisor's financial year. A franchisor must also update the document outside that cycle if a significant change occurs, and must notify franchisees of certain materially relevant facts as they arise, separately from the annual update.
What happens if a disclosure document does not meet the Code's requirements?
Franchisors can face significant civil penalties, including penalties starting at ten million dollars for failing to disclose materially relevant facts, and the document's deficiencies can weaken the franchisor's position in a later dispute with a franchisee.
Disclaimer: This article provides general information only and is not legal advice. The law is complex and varies based on individual circumstances. You should seek specific legal advice about your particular situation before making any decisions about legal matters.
Neda Whelan
Neda Whelan is the Founder and Principal of Whelan Lawyers. With over a decade of experience as former General Counsel for major national networks such as Clark Rubber and Jim's Group, she provides practical, commercial-first legal strategies for franchisors and business owners.
