I’ve been asked a couple of times recently about marketing fees they pay to their franchise / newsagency marketing group and the obligations of the groups to disclose how the funds are spent.
One business owner told me their group, which operates under a franchise agreement, has refused to provide any visibility of marketing funds collected from members and how they have been spent. The group in question is collecting well over half a million dollars a year.
The law is clear on marketing funds for groups that fall under the franchise code of conduct.
Here is what the Trade Practices (Industry Codes – Franchising) Regulations 1998 says about this:
17 Marketing and other cooperative funds
(1) If a franchise agreement provides that a franchisee must pay money to a marketing or other cooperative fund, the franchisor must:
(a) within 4 months after the end of the last financial year, prepare an annual financial statement detailing all of the fund’s receipts and expenses for the last financial year; and
(b) have the statement audited by a registered company auditor within 4 months after the end of the financial year to which it relates; and
(c) give to the franchisee:
(i) a copy of the statement, within 30 days of preparing the statement; and
(ii) a copy of the auditor’s report, if such a report is required, within 30 days of preparing the report.
(2) A franchisor does not have to comply with paragraph (1) (b) for a financial year if:
(a) 75% of the franchisor’s franchisees in Australia, who contribute to the fund, have voted to agree that the franchisor does not have to comply with the paragraph; and
(b) that agreement is made within 3 months after the end of the financial year.
(3) The agreement referred to in paragraph (2) (a) will remain in force for 3 years, and franchisees must vote, at the end of that time, in accordance with paragraph (2) (a), for the agreement to remain in force.
(4) If a franchise agreement provides that a franchisee must pay money to a marketing or other cooperative fund, the reasonable costs of administering and auditing the fund must be paid from the fund.
If you are in a marketing group or any franchise group and contributing to a marketing fund, they have an obligation to report to you. If they have not been doing this you can report them to the ACCC.