If the Franchise Agreement is the contract that governs the relationship, the Disclosure Document is the artefact that makes the relationship informed. The Code requires franchisors to give it to prospective franchisees at least 14 days before any binding commitment. Skipping that window — or skimping on what the document contains — is one of the fastest ways to void an agreement.
The 14-day rule
Disclosure must happen 14 days before either: (a) the franchise agreement is signed, or (b) any non-refundable payment is made by the prospective franchisee. Whichever is earlier. The intent is plain: you cannot rush a franchisee through diligence.
What the document contains
The Code prescribes content in detail. The major sections:
1. Franchisor identity
Legal name, ACN, business address, directors, business experience. If the franchisor is part of a group structure, the relationships must be disclosed.
2. Business experience
Five years of relevant business history for the franchisor and key personnel. Bankruptcies, prior franchise involvement (failed or otherwise), criminal history.
3. Litigation history
Material proceedings — current, recent, and prospective. Hidden litigation is a common ground for rescission.
4. Payments to third parties
Any payments the franchisor receives from the franchisee's required suppliers (rebates, kickbacks, commissions) must be disclosed by category.
5. Existing & former franchisees
Contact details for current franchisees (where consent given). Contact details for franchisees who left in the past three years. The prospect is expected to call them — and they will.
6. Intellectual property & territory
What IP rights the franchisee gets. Territory definition, exclusivity (or absence of it).
7. Marketing fund
Last audited accounts of the marketing fund. Permitted uses. Decision-making process around expenditure.
8. Financial information
Audited financial statements (or solvency statement for newer franchisors). The franchisee gets a real picture of the financial health of the brand they're committing to.
9. Earnings information (optional)
If the franchisor makes any earnings representation — directly or in marketing materials — it must be in the Disclosure Document with the supporting basis. If no representation is made, the document must say so explicitly.
The drafting mistakes that void agreements
Omitting material information
The biggest one. A franchisor under disclosure pressure may leave out a difficult fact (a pending dispute, a previous franchise failure, a related-party transaction). Courts find these gaps. Agreements get voided.
Out-of-date numbers
The document must be updated annually. Stale figures — even by months — can trigger rescission rights.
Earnings projections without basis
Telling a franchisee what they "could" earn without backing it up in the Disclosure Document is the single most common cause of franchisee claims.
Marketing fund accounting
Marketing fund contributions are not general revenue. They must be ring-fenced, accounted for, and audited. Co-mingling them with general operating funds is an ACCC priority.
The 14 days getting compressed
Founders sometimes feel pressure to "speed things up" with an eager prospective franchisee. The 14 days are not negotiable. Closing inside them voids the agreement.
What franchisees should do with it
Read it. Slowly. Have a lawyer read it. Call three of the existing franchisees on the list. Ask the awkward questions. The 14 days exist precisely so that none of this is rushed.
Where ABC fits
Every franchise mandate we deliver includes a Code-compliant Disclosure Document — drafted, audited, and updated annually. See our Legal & Compliance practice.