The Law Relating to Disclosure Documents in Franchising

Abstract

The franchises have a great impact on the world economy, based on FranData in 2015 research franchising accumulates a turnover of 1.6 billion US dollars, representing 2.3% of world GDP, has 2.2 million companies involved and employs nineteen million people. Disclosure documents in franchising are very important, the first step to start franchise business is to provide disclosure documents to the prospective franchisee by the franchisor. How disclosure documents are regulated in different jurisdictions (common law system and civil law system), what are the information that should be included in disclosure document and the consequence of failure or no compliance with the requirement of disclosure and how this information protect the interest of franchisees. The main objective of this paper is to discuss/analysis the law relating to disclosure documents in franchising and which information should be in the disclosure documents. Also, to discuss how the providing of disclosure documents protects the interest of the franchisees and the consequence of failure or no compliance with the requirement of disclosure by the franchisors. In this paper, a doctrinal legal method complimented with comparative law research was used. The armchair library approach was employed for the collection of the primary legal materials (France Commercial Code Fold Regulatory part Articles R121-1 to R958-2, Malaysian Franchise Act 1998; Tunisia Decree No 2010-1501, June 21, 2010; Australia Franchise Code of Conduct 1998; South Africa Consumer Protection Act, 2008 (Act NO. 68 OF 2008) Regulations; and US Federal Trade Commission Franchise Rule, 2008). For this purpose, the Sultanah Bahiyah Library was used. The secondary data include textbooks, articles, academic journal, newspaper, dictionaries, and information on the internet, government publications, thesis, online database and guidelines which are relevant to the area. The paper adopts the exploratory analysis and comparative method. The findings show that the content of disclosure documents and timing of disclosure are very important elements to protect the interest of franchisees. The results shown also that the imposed penalties in the case of a failure to comply with disclosure requirements aims to prevent the franchisor from the breach of the disclosure requirement. 

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