I’m A Franchisor – What Should I Know About Marketing Funds? (2025 Updated)

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A large part of the appeal of bigger franchises like McDonald’s or KFC is the brand recognition that comes with the purchase of such a franchise. Marketing is a key aspect of this, and while it includes national or global campaigns coordinated by the head office, there is also significant value in localised marketing efforts by individual franchisees.

Individual franchisor involvement in the marketing of their own franchise is essential to the success of the business. Not only do you benefit from the broader advertising initiatives provided by the franchisor, but you also gain from targeted, grassroots efforts that resonate with local markets. For further insights on maintaining effective franchise relationships, check out our expert franchise lawyer services.

Marketing funds are a crucial element influencing the prosperity – or challenges – of a franchisor’s business. These funds comprise a pool of financial resources contributed by the franchisee network, enabling the franchisor to undertake large-scale promotional activity. Effective management of these funds is vital, and many franchisors enhance transparency by utilising compliant processes and regular audits, as detailed in our guide on Disclosure Documents for Franchising.

However, operating such a fund comes with obligations under the Franchising Code of Conduct (FCC). Given that the FCC is periodically amended – with the latest updates reflecting the business environment of 2025 – it’s important to review it regularly to ensure your practices remain compliant.

As a final point of reference, while marketing funds can be administered by an external fund administrator, this article assumes that the franchisor manages the marketing fund directly. This approach allows you to maintain direct oversight and quicker responsiveness to any regulatory or business changes.

What Obligations Do You Have Under The Franchising Code Of Conduct?

Preparation Of Financial Statement And Auditing

Many of the obligations owed to your franchisees are set out in section 15 of the FCC. Below is a summarised list of these essential requirements:

The franchisor, as the fund administrator, must prepare an annual financial statement within 4 months after the end of the financial year, detailing all of the fund’s receipts and expenses.
The statement must then be audited within 4 months of the financial year’s end. (However, if within 3 months after the year’s end, 75% of contributing franchisees vote that an audit is not necessary, this step can be waived.)
A copy of the financial statement must be provided to each franchisee within 30 days of its preparation. If audited, the auditor’s report must also be distributed within 30 days of its receipt.
The franchisor is responsible for paying the reasonable costs associated with administering and auditing the fund, from within the fund’s resources.

Disclosure Requirements

Franchisors must maintain a Disclosure Document to keep current and prospective franchisees well informed. This document is vital, as it helps franchisees make a reasonably informed decision and outlines how the franchise is expected to operate.

Annexure 1 of the FCC provides the required format for this document, which must be updated within 4 months after the close of each financial year. Section 15 of this annexure specifies the information that must be disclosed regarding the marketing fund, ensuring all parties are aware of its management and usage.

This section’s requirements have been elaborated in full below:

For marketing funds, the following details must be disclosed:

The types of contributors to the fund (e.g., franchisors, franchisees, or external parties).
The contribution amount required from each franchisee, and whether different rates apply.
Details of who controls or administers the fund.
Whether the fund is audited, and if so, by whom and at what intervals.
The process for franchisees to inspect the fund’s financial statements.
The categories of expenses covered by the fund.
Historical data on the fund’s expenses for the last financial year, including the breakdown by production, marketing, administration, and any other stated expenses.
Information on whether the franchisor, master franchisor, or their associates provide goods or services funded by the marketing pool – with full details of such goods or services.
Clarification on whether the franchisor or master franchisor is required to allocate part of the fund towards marketing or promoting the franchisee’s business.

Payments To And From Marketing Funds

If a franchisor mandates that a franchisee make payments into a marketing fund that the franchisor controls or administers, section 31 of the FCC outlines the following key requirements:

All payments to the marketing fund must be kept in a separate account, distinct from the general operational accounts of the franchisor.
Franchisors operating within a franchise system must contribute to the marketing fund on an equal basis with the other franchisees.
Payments from the fund must be used solely for expenditures that have been disclosed in the Disclosure Document, deemed legitimate marketing expenses, or approved by a majority of the contributing franchisees.

Good Faith

Under section 6 of the FCC, all parties within a franchise agreement must act in good faith. In practice, this means you are required to behave reasonably and not exercise your powers arbitrarily or for an ulterior motive. This good faith requirement is a fundamental principle underpinning many contractual obligations – as detailed in our article on what makes a contract legally binding.

Actions that lack good faith – such as dishonesty or undermining the benefits due under the contract – not only risk a breach of the FCC but may also attract significant penalties. For instance, if you under-contribute to the marketing fund compared to your fellow franchisees, it would likely be seen as a violation of both section 31 and the overarching good faith requirement.

What Are The Penalties For Breaching The FCC Obligations?

The penalties for failing to meet the obligations under the FCC are significant. For instance, if you do not prepare your financial statements or have them audited within the stipulated time frames, the penalty is 300 penalty units. In 2025, with adjustments to penalty unit values, these fines can be considerably higher than in previous years.

For example, in 2025 Domino’s was penalised for not providing timely financial statements and audit reports to its franchisees – an infringement that resulted in a fine estimated at around $20,000, though the exact figure depends on the current valuation of penalty units. Penalties are similarly imposed for failing to update disclosure documents or for not adhering to the guidelines for managing payments into and out of the marketing fund.

How To Manage Marketing Funds

Managing a marketing fund effectively involves two principal aspects: the actual management of the fund and the transparent disclosure of related information. The current FCC guidelines and the ACCC’s recommendations provide a robust framework for both areas.

It is essential to implement regular internal audits and maintain clear, detailed records. Our article on legal requirements for starting a business offers further guidance on establishing strict compliance protocols. By doing so, you help safeguard against inadvertent errors and ensure that your marketing fund is used exclusively for authorised expenses.

In addition, ongoing compliance is crucial. As FCC regulations are updated to reflect the 2025 business landscape, regularly reviewing any amendments and adjusting your processes accordingly is imperative. Consulting with our franchise law specialists can keep you ahead of regulatory changes and ensure your fund management practices remain robust and current.

Helpful Tips For Finalising Your Marketing Fund Statement

When preparing your marketing fund statement for submission, consider these practical tips:

Clearly indicate who contributes to the fund and provide a detailed breakdown of where and how the money is being spent.
Ensure that the statement is easy to read and comprehensive, offering full transparency of expenditures.

The fund administrator must then obtain an audit of the statement within 4 months of the financial year’s end. Once audited, the report should be promptly circulated to all franchisees, reinforcing trust and ensuring mutual confidence in the system.

It is also critical to verify that all expenditures comply with the designated purposes outlined in the Disclosure Document. Only authorised use of funds, explicitly for legitimate marketing expenses approved by the franchisee body, should be reflected in the statement.

Regular internal reviews and updates to your fund statement process are recommended to align with any FCC amendments and best practice guidelines. This proactive approach can help prevent compliance issues before they arise.

Key Takeaways

Marketing funds represent a vital resource for large franchises, enabling significant promotional activities. However, they are tightly regulated under the FCC and must be managed with utmost transparency and accountability. Staying compliant in 2025 means adhering to strict financial, disclosure, and good faith requirements. Consulting an expert franchise lawyer is highly recommended to navigate these obligations effectively.

If you need assistance with managing your marketing funds or ensuring that your disclosures meet current regulatory standards, please reach out to us at team@sprintlaw.com.au or call us on 1800 730 617 for an obligation-free consultation.

Will Tinney

Will is currently completing his Juris Doctor at the University of Melbourne and is interested in helping to provide equitable and efficient access to legal resources.

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