The timeframe for franchise companies to have the reporting on their Marketing Fund activities fully in order, under the Franchising Code of Conduct, is 4 months after the end of their financial year.
For most companies that operate on a financial year basis, their Marketing Fund reporting must be completed in four months from June 30, i.e. the end of October each year.
The requirements of the Code, which came into effect in 2015, place a greater onus on transparency in the reporting of group Marketing Fund activities.
Franchisors must now prepare an annual financial statement detailing the money received by their Marketing Fund and how it is spent, and have it audited by a registered company auditor. The ACCC can also audit franchisors to monitor compliance with the Code.
The Marketing Fund statement and auditors report is required to be prepared within four months of the end of a company’s financial year. Copies of the documents must then be provided to franchisees within 30 days of their preparation.
As a Marketing Manager, are you fully aware of the extent of your Marketing Fund obligations under the new Code?
Internal communication systems throughout a franchise network that are clear, transparent and accountable are crucial to the role of a Marketing Manager and the myriad of responsibilities that this position entails.
They are also essential to meeting the new Code requirements surrounding Marketing Funds, which have long been a common source of contention and conflict between franchisees and franchisors.
If you operate a franchise Marketing Fund, the new Code now imposes restrictions on how you deal with the marketing and advertising fees contributed to that fund. Under the new Code, which came into effect from 1 January 2015, you must:
- Keep the money in a separate bank account from your other money
- Contribute to the fund, on the same basis as other franchisees, for each corporate store that you operate
- Only spend marketing money on expenses that were disclosed in your disclosure document, have been agreed to by a majority of franchisees, are legitimate marketing or advertising expenses, and represent the reasonable costs of administering and auditing the fund.
With the first deadlines for the new Marketing Fund reporting requirements fast approaching, how is your company placed in terms of meetings its obligations in this area?
How do you demonstrate that you have accurately reported all of your Marketing Funds activities within the required timeframe and then ensured that all your franchisees can access the information?
Are you prepared and do you have the systems in place if asked to demonstrate the legitimacy of all your marketing Fund expenditure?
For Marketing Managers, the answers to these questions can only be addressed via outstanding internal communications structures throughout their franchise network.
The overriding message from the Code regarding Marketing Funds is that Marketing Managers must ensure their company has the systems and procedures to justify and account for why and when they have spent money from their Fund.
Everything needs to be in there in black as you could be called on to substantiate it legally!
They key is having a fully structured and co-ordinated internal communications map that clearly tracks all activities relating to the group Marketing Fund. This includes showing that the money has been kept in a separate account, there has been the same contribution for corporate stores as for franchisees, and details of all of the spending decisions that have been made from the Marketing Fund.
This will often require more time and effort. For example, to achieve the agreement of a majority of franchisees on something that is new or innovative is potentially a long-term project for a reasonable sized and relatively mature network.
For Marketing Managers to navigate the requirements of the new Code requires the implementation of an all-encompassing, across-the-board approach to internal communications right throughout their franchise network.
Better communications systems must be in place with more transparency so all stakeholders are kept fully up to date on all Marketing Fund activities every step of the way.