Marketing and co-operative funds – the pitfalls and traps

20 April 2009 Topics: Franchising

Many franchise agreements contain provisions in relation to marketing and co-operative funds.

Marketing and co-operative funds are funds (marketing funds) in which franchisees contribute money which is used to drive marketing campaigns and brand awareness for the franchise.

The Franchising Code of Conduct makes provisions for marketing funds.  The compulsory disclosure document that must be provided to franchisees by franchisors must contain certain information in relation to marketing funds.  The required information includes:

  1. the type of expenses for which the fund may be used;
  2. whether the fund is audited’
  3. whether the fund’s financial statements can be inspected by or given to franchisees; and
  4. the fund’s expenses for the last financial year.

Many disputes between franchisors and franchisees arise due to issues relating to marketing funds. It is therefore important to ensure that your franchise agreement clearly sets out the terms of the marketing fund and the parties’ obligations and rights in relation to the fund.

If a marketing fund is not properly described in the disclosure document or, the franchisor is in breach of the terms governing the marketing fund the consequences can range from enforcement proceedings by ACCC to the imposition of a fine.

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