News & Insights

Delicia Franchising Pty Ltd (Delicia) who is known for their ‘Delicia Acai and Protein Bar’ franchises, has admitted to breaching the Franchising Code and Australian Consumer Law, and provided an undertaking to the Australian Competition and Consumer Commission (ACCC).

Why was the undertaking provided?

The undertaking comes after the ACCC launched an investigation into Delicia over its failure to meet the disclosure requirements under the Franchising Code. This investigation uncovered that Delicia’s annual marketing fund financial statements for the 2020, 2021 and 2022 financial years did not provide sufficient detail of the fund’s recipients and expenses.

Under the Franchising Code, annual marketing fund statements are required if the franchise agreement requires franchisees to contribute to a marketing fund.

In response to the ACCC’s investigation, Delicia provided a formal undertaking that it will:

• Prepare annual marketing fund financial statements containing sufficient detail and provide them to franchisees within 30 days, as is required under the Franchising Code, while also complying with various other marketing fund obligations;
• Commit to issue corrective notices to its current franchises informing them of the ACCC’s investigation and the assurances made in the undertaking; and
• Implement and maintain a compliance program for a 3-year period, which includes training in the Franchising Code.

In addition to the undertaking, the ACCC also issued Delicia an infringement notice requiring them to pay $11,100 for its admitted failure to provide franchises with a copy of its annual marketing fund financial statements.

What does this mean for franchisors?

This is not the first time that the ACCC has taken action against a franchisor for failing to meet their disclosure obligations. In our previous Insight, our franchise team discussed the $2.6 million penalty imposed on Ultra Tune Australia Pty Ltd for breaching the Franchising Code by failing to meet its marketing fund disclosure obligations.

Delicia’s breach comes as a further warning to Franchisor’s to ensure they prepare sufficiently detailed marketing fund statements and provide them to franchisees. Failure to meet these disclosure requirements will risk breaching the Franchising Code and receiving significant penalties.

How can you remain compliant with marketing disclosure obligations under the Code?

Our tips for compliance:

• understand the range of marketing obligations imposed by the Code AND the critical annual dates;
• Ensure you have appropriate policies and procedures in place in relation to advertising and marketing campaign adoption and spend;
• In relation to annual marketing fund disclosure:
  • keep detailed records of all activities and their costs;
  • keep records of any internal costs incurred (personnel’s time and resources used) and charged to the fund;
  • obtain annual marketing reports from any advertising agencies;
  • engage your fund auditor early, so the audit report is completed in good time; and
  • provide specific and detailed information about all advertising conducted – eg. what was conducted, when, where was it seen, how often was it re-run?

If you are unsure of your obligations under the Franchising Code or have any questions regarding marketing fund compliance, please contact our Franchising team.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.