If you’re running a franchise system, your franchise disclosure document isn’t something you “set and forget”. It’s one of the key documents that helps your franchisees understand what they’re buying into, how your system works, and what they can realistically expect.
And if your disclosure is out of date, vague, or inconsistent with your franchise agreement, it can create real risk - from disputes with franchisees through to potential issues under New Zealand’s consumer and fair trading laws.
This guide has been updated to reflect current expectations and common risk areas franchisors are dealing with right now, including digital marketing, data handling, and increased scrutiny on “salesy” business claims. Let’s walk through what updating your franchise disclosure document involves, when you should do it, and how to do it properly.
What Is A Franchise Disclosure Document (And Why Does It Matter)?
A franchise disclosure document (often called a “disclosure document”) is a written document that gives a prospective franchisee important information about your franchise system before they sign up.
In New Zealand, there isn’t a single dedicated “Franchise Act” that mandates a specific disclosure format in the same way some other jurisdictions do. That said, disclosure is still a major part of doing franchising properly - and it’s closely tied to:
- Trust and transparency in your franchise recruitment process;
- Reducing disputes by setting expectations early;
- Compliance with general NZ laws (especially around misleading or deceptive conduct); and
- Commercial best practice (many systems align their processes with industry standards).
Your disclosure document also needs to “match” the rest of your franchise legal set-up. For example, the fees and obligations described in the disclosure should align with what’s actually in your Franchise Agreement.
Even if your franchisee loves your brand and is keen to sign, disclosure is still the part that tends to get picked apart later if a relationship breaks down. When people are unhappy, they often look back and ask: “Was I properly told what I was getting into?”
When Do You Need To Update Your Disclosure Document?
In practice, most franchisors should treat updating their disclosure document as a regular compliance task - not a once-off exercise.
There are two common triggers:
1. Scheduled Updates (At Least Annually)
Many franchise systems update their disclosure document at least once per year. This makes sense because key information tends to change over time - including fees, supplier arrangements, costs, and business operations.
Even if your system feels stable, an annual update is a good “health check” to confirm your disclosure still reflects reality.
2. Event-Based Updates (After Material Changes)
If something significant changes in your franchise system, it’s usually a sign your disclosure document needs an update right away (not just at year-end).
Common examples include:
- you change your franchise fee structure, royalty model, or marketing fund contributions;
- you introduce new technology requirements (POS systems, booking software, CRM platforms, delivery apps);
- you materially change training, onboarding, or support processes;
- you change key suppliers or introduce mandatory supplier arrangements;
- you change your territory model (exclusive territories, shared territories, online sales allocation);
- you restructure your franchisor entity (new company, new ownership, new directors);
- there’s a dispute, claim, or other issue that should be disclosed to new franchisees; or
- you update brand standards in a way that affects cost or workload for franchisees.
A practical way to think about it: if the change could affect a franchisee’s decision to join the system - or how much it will cost them to operate - it’s probably “material”.
What Should Be Reviewed During A Disclosure Document Update?
Updating your disclosure document isn’t just about changing a date on the front page. A proper update involves checking that your disclosure is accurate, complete, and consistent with how your franchise actually runs today.
Here are the areas we typically recommend reviewing.
Franchise Fees, Ongoing Royalties, And Other Payments
Your disclosure should clearly set out:
- upfront franchise fees (and what they cover);
- ongoing royalties (fixed, percentage, tiered, minimums, etc.);
- marketing fund contributions and how they’re calculated;
- technology fees, training fees, audit fees, or renewal fees; and
- any other payments franchisees must make (including payments to third parties you nominate).
This is one of the most common sources of misalignment: the disclosure says one thing, the agreement says another, and your sales conversations imply something else. Cleaning this up early can prevent a lot of headaches later.
Estimated Set-Up Costs And Ongoing Operating Costs
Franchisees usually want to know: “How much will this cost me to get started?” and “What will my ongoing costs look like?”
If you include estimates, they need to be supportable and not presented in a way that could mislead. This is particularly important under the Fair Trading Act 1986, which prohibits misleading or deceptive conduct in trade.
A good update process includes sanity-checking whether your cost ranges still reflect current reality (especially if fit-out, rent, wages, and supply costs have shifted).
Franchisor And Franchise System Details
If your franchisor entity has changed (directors, shareholding, related entities, restructure), your disclosure should reflect that clearly.
For example, if you’ve moved IP ownership into a separate company, or created a group structure, make sure the relationship is explained in plain terms. It’s also worth ensuring this lines up with your broader company governance documents, like your Company Constitution where relevant.
Intellectual Property (Brand, Trade Marks, Systems)
Franchisees are buying into your brand and systems - so the disclosure should be consistent about:
- what trade marks are used and who owns them;
- what brand assets the franchisee can use (and on what terms);
- any restrictions on marketing, social media, and local advertising; and
- what happens if the franchise ends (including stopping use of your brand).
If your IP portfolio has changed, or if you’ve expanded into new brand names or sub-brands, that’s a strong reason to update your disclosure.
Marketing Fund And Advertising Controls
Marketing funds are often sensitive. Franchisees generally want clarity on:
- what the marketing fund can be spent on;
- whether it covers national marketing only or also local support;
- how decisions are made; and
- whether franchisees can opt out of certain campaigns.
If your marketing approach has changed (for example, shifting heavily to paid social, influencers, or lead generation campaigns), your disclosure should be updated so franchisees understand the practical reality of how marketing works now.
Modern franchise systems often rely heavily on shared platforms - like booking tools, customer databases, email marketing systems, delivery apps, loyalty programs, and reporting dashboards.
Your disclosure document should be clear about:
- what systems the franchisee must use;
- who pays for them;
- who owns the customer data; and
- how data is collected, stored, and used.
This overlaps with your obligations under the Privacy Act 2020. If your system collects personal information (which most do), make sure your disclosure doesn’t contradict your Privacy Policy or the way your business actually handles data.
Employment And Operational Expectations
Franchisees often ask operational questions that are really employment questions in disguise - like staffing levels, award rates, rostering, and performance expectations.
Your disclosure should avoid making unrealistic assumptions about labour costs or running the business “hands-free”. It’s also worth ensuring your franchise system documents don’t accidentally encourage franchisees to break employment law (for example, by implying they can avoid minimum entitlements).
If you provide templates or guidance to franchisees who hire staff, it’s sensible to make sure it’s aligned with NZ requirements and supported by properly drafted Employment Contract documentation where appropriate.
How Does Disclosure Tie Into NZ Legal Risk (And What Can Go Wrong)?
Even without a franchise-specific disclosure law, franchisors in New Zealand still need to be careful. Disclosure documents and franchise recruitment materials can create legal exposure if they’re inaccurate, incomplete, or overly optimistic.
Misleading Or Deceptive Conduct (Fair Trading Act 1986)
The Fair Trading Act 1986 is a big one for franchisors. In simple terms: you can’t mislead people in trade, and that includes how you describe the opportunity to prospective franchisees.
Common risk areas include:
- claims about likely earnings, profit, or “guaranteed” performance;
- overstating demand or the strength of your brand in a location;
- presenting rough figures as if they’re proven financial outcomes; and
- implying franchisees will have rights (like exclusivity) that don’t actually exist in the contract.
Your disclosure document is one of the first places regulators, mediators, or courts may look if someone alleges they were misled.
Unfair Or Unclear Contracting (And Relationship Breakdown)
Franchise relationships are long-term and operationally intense. When things go wrong, disputes often arise around:
- fees and what they were meant to cover;
- marketing fund spending;
- territory encroachment and online sales;
- mandatory supplier arrangements;
- renewals, transfers, and exit rights; and
- what support the franchisor promised vs what was delivered.
A well-updated disclosure document won’t prevent every dispute, but it can significantly reduce the “he said / she said” problem by showing that expectations were clearly communicated upfront.
Inconsistency Between Documents
One of the easiest mistakes to make is having your disclosure document drift away from your contracts and operational documents over time.
For example, your agreement might require a marketing contribution of 3%, but your disclosure still says 2%. Or your agreement says the franchisor can change suppliers, but your disclosure promises a particular supplier arrangement.
If you’re updating disclosure, it’s often the right time to do a broader franchise document check, including whether your Franchise Disclosure Document Update should be paired with an agreement refresh or redraft.
A Practical Checklist For Updating Your Disclosure Document
If you want a simple internal process to follow, here’s a practical checklist that many franchisors use when reviewing disclosure.
Step 1: Gather The “Reality” Data
- Current fee schedule (initial fees, ongoing fees, marketing fund, technology charges)
- Current onboarding and training structure
- Current supplier arrangements (including rebates or commissions, if applicable)
- Current territory approach (including online sales and lead allocation)
- Updated cost estimates for set-up and operations
- Any disputes, claims, or significant franchisee issues that may need disclosure
Step 2: Cross-Check Against Your Franchise Agreement And Processes
- Do the fees match the contract wording?
- Does the disclosure describe the same renewal and termination process as the agreement?
- Are the franchisor support promises realistic and consistent with what you actually deliver?
- Are supplier and marketing fund statements consistent with your internal processes?
- Remove “casual” earnings claims that can’t be backed up
- If you include performance information, ensure it’s properly explained and not misleading
- Make sure you’re not implying outcomes are guaranteed
Step 4: Update Privacy And Technology Disclosures
- Clarify who owns customer data and how it’s used
- Confirm any third-party platforms and what franchisees must pay for
- Ensure your privacy approach is consistent across the system (including any privacy notices, website policies, and platform terms)
Step 5: Get A Legal Review Before You Roll It Out
Templates and quick edits can be risky here. A disclosure document is only helpful if it’s accurate, legally safe, and properly aligned with your contracts.
It’s also worth remembering that disclosure is usually part of a broader franchise legal framework. If you’re expanding your franchise system, updating recruitment processes, or adjusting franchisee obligations, it might be time to review your broader Franchisor package so everything works together cleanly.
Key Takeaways
- A franchise disclosure document should be treated as a living document that needs updating as your franchise system changes.
- Even though NZ doesn’t have a single franchise disclosure statute, outdated or inaccurate disclosure can create serious risk under laws like the Fair Trading Act 1986 and the Privacy Act 2020.
- You should update your disclosure at least annually, and also whenever there’s a material change (fees, suppliers, territories, technology, support, or structure).
- Common update areas include franchise fees, marketing fund arrangements, estimated costs, IP ownership and usage, technology requirements, and customer data handling.
- Inconsistency between your disclosure document and your franchise agreement is a common (and avoidable) cause of franchise disputes.
- Before you issue an updated disclosure document, it’s worth having it legally reviewed so it’s properly tailored to your franchise model and aligned with your contracts.
If you’d like help updating your franchise disclosure document or reviewing your franchise documents as a set, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
