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Franchisor's online sales disclosure

Posted on 29 October 2014

The raft of anticipated changes to the Franchising Code of Conduct are wide ranging and franchisors need to be aware of the anticipated new and extended obligations to be imposed on them.

One such change is the anticipated requirement for franchisors to disclose information to their franchisees and proposed franchisees about online sales.

It would seem that the franchisor will be required to disclose, amongst other things, the following:

1. if the franchisor, its associates, the franchisee or other franchisees may make online sales;

2. if goods or services may be supplied online then the extent to which they will be supplied into a franchisee's territory or, if goods are sold through a third party website then the domain name or URL of that website and registration details; and

3. any profit sharing arrangement.

The disclosure requirements are not limited to goods or services sold through the franchise network.  So, a franchisor with other products (not supplied by the franchisees) may need to disclose those products here. 

Also, if the franchisor or its associates distribute products to, for example, the big supermarket chains then details of that supply will need to be disclosed as those chains have online ordering and delivery systems.

Franchisors need to be formulating policies now and also researching how their supply network sells its goods or services.

It may be necessary for the Franchisor to be more stringent with supply arrangements and the contracts around those relationships may need to address these issues to regulate supply online.

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