Do your fund records, disclosure documents and internal processes all tell the same story? For franchisors, levies for marketing and other shared purposes are not just money in and money out.
Once you require franchisees to contribute money for a shared purpose, you are likely running what the Franchising Code calls a specific purpose fund – and the Code sets rules for how that money is recorded, used and explained.
This is where problems often start. If accounts are not kept separate, spending is hard to trace, or disclosure documents do not match what happens in practice, franchisees may question whether contributions are being used properly.
Further, you may be failing to comply with the associated legislative requirements of running a specific purpose fund. From there, an administration issue can quickly become a dispute, an ACCC concern or an avoidable legal cost.
A better approach is to treat fund management as part of your network’s compliance system, not just an annual paperwork task.
Clear records, current disclosure documents and early communication help you answer questions quickly, reduce disputes and protect trust across the network.
5 practical tips for managing funds, records and disclosure
- Define each fund clearly: Make sure your franchise agreement and disclosure document explain what each fund is for and how franchisee contributions may be used.
- Keep fund money and records separate: Hold contributions in a dedicated account and track spending carefully, so you can show where money has gone and why. This is also a requirement of the Code.
- Meet your reporting and disclosure deadlines: The Code sets timeframes for fund financial statements, audits and disclosure updates. Diarise them rather than dealing with them late.
- Use fund for approved purposes: Ensure that you are only using the funds for the specific shared purpose and not for other expenses not directly tied to the purpose.
- Communicate changes early: Tell franchisees about changes that affect fund use, brand standards, or network operations before they become a dispute.
Free webinar: Meeting Your Franchisor Obligations: Specific Purpose Funds and Disclosure
To help you meet your specific purpose fund obligations and stay compliant with the Franchising Code, LegalVision is hosting a free webinar on Meeting Your Franchisor Obligations: Specific Purpose Funds and Disclosure.
Join LegalVision on Tuesday, 22 September at 11 am AEST when Annalise Catania (Practice Leader) and Joseph Harman (Lawyer) will discuss:
- Specific purpose funds: what qualifies under the Franchising Code and the obligations when franchisees contribute;
- Fund administration: maintaining separate accounts, tracking contributions and using funds for their stated purpose;
- Disclosure requirements: what fund information must appear in your disclosure document, before and during the franchise relationship; and
- Managing compliance risk: practical steps to prevent common administration and disclosure issues.
Following the webinar, there will be a live Q&A. If you cannot make it, you can still register, and LegalVision will send you a copy of the recording. You are also eligible to receive a free legal consultation.
