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Franchise Disclosure Documents

The Franchise Code of Conduct requires franchisors to provide prospective franchisees with franchise disclosure documents at least 14 days before they sign their franchise agreement. The franchisor is required to provide this document every time a franchisee enters, renews, or extends their franchise agreement. Hence, the franchisor will also have to provide a franchise disclosure document if an existing franchisee decides to transfer their franchise to someone else.

The purpose of the franchise disclosure document is to help prospective franchisees make an educated decision about whether they would like to become part of the franchise. When the franchisor provides it to existing franchisees, it gives them an update and better understanding about how the franchise is running.

What Does a Franchise Disclosure Document Contain?

The franchise disclosure document should contain all relevant and important information about the franchisor and the franchise as well as the conditions that will apply to the franchisee. Some of the more important information the franchise disclosure document should include are:

  • The franchisor’s details;
  • The business experience of each officer (directors, secretaries, administrators, office holders, partners) of the franchisor in the last ten years;
  • The details of any current litigation;
  • The details of existing and former franchisees;
  • The details of any intellectual property owned by the franchisor and the franchisee’s rights concerning these;
  • The franchise site and territory policy;
  • The details regarding the franchise’s marketing fund;
  • The obligations of the franchisee regarding suppliers of goods and services;
  • A summary of the costs and fees;
  • The details of any post-agreement arrangements such as renewals;
  • Information about transferring the franchise; and
  • The financial details of the franchisor

How Can Our Franchise Lawyers Help?

The Franchise Code of Conduct mandates that franchisees provide a written statement to the effect that they have either:

  • Received the advice from a professional (such as franchise lawyer); or
  • Received, read and understood the franchise disclosure document before signing the franchise agreement.

Given the importance of reviewing this document, LegalVision’s lawyers are more than happy to assist franchisees to review and understand it in its entirety.

We can also help franchisors draft and update their franchise disclosure documents (which they must do annually). Further, given the confidential nature of the information that franchisors are providing, it is customary to request the franchisee to sign confidentiality agreements. Our lawyers are also happy to draft these agreements on your behalf as well.

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