Franchise Purchase Checklist: Key Legal Steps In Australia

Buying a franchise in Australia can feel like a shortcut to business ownership - you’re stepping into a model that (in theory) has already been tested, with established branding, systems, suppliers and training.

But it’s not “business ownership on easy mode”. When you buy a franchise, you’re also signing up to a legal relationship with the franchisor, strict operating rules, and ongoing fees - and your success can depend heavily on what’s in the franchise documents (and what isn’t).

If you’re considering buying a franchise in Australia, this guide walks you through the legal steps you should take before you sign anything or pay any money. The aim is to help you reduce risk, understand your obligations, and move forward with confidence.

Note: this article is general information only and isn’t legal advice. Your circumstances (and the franchise system) can change what you should do. You should also speak with an accountant or financial adviser about tax, accounting and financial viability before committing.

What Does “Buying a Franchise” Actually Mean (Legally)?

When you buy a franchise, you’re usually getting a licence from the franchisor to operate a business using their system, branding and intellectual property (such as logos, trade marks, menus, recipes, processes, software and marketing).

In practice, there are a few common scenarios:

• New franchise site: you sign a franchise agreement for a new territory or location that you build up from scratch.
• Buying an existing franchise business: you purchase a running business from an existing franchisee and then enter (or transfer into) a franchise agreement with the franchisor.
• Multi-site franchisee arrangement: you commit to multiple sites over time, sometimes with development schedules and milestones.

In all cases, you should expect that your rights and obligations will be set out primarily in the franchise agreement and disclosure materials, and the relationship is regulated by the Franchising Code of Conduct (a mandatory industry code under the Competition and Consumer Act 2010 (Cth)).

Important mindset shift: you’re not just buying “a business”. You’re entering a long-term contract where the franchisor usually keeps strong control over how the business is run.

Step 1: Do Your Franchise Due Diligence (Before You Fall In Love With The Brand)

When people get excited about how to buy a franchise in Australia, they often focus on the numbers (fees, rent, potential revenue) and forget the operational and legal realities.

Strong due diligence is how you uncover red flags early - before you’re locked into a contract that’s hard (and expensive) to exit.

Clarify What You’re Actually Buying

If you’re buying an existing franchise business, ask: are you buying shares in a company, or are you buying business assets (like equipment, fit-out, stock, customer lists, phone numbers, domain names and goodwill)?

These deal structures have very different risk profiles. An “asset sale” is common, but even then you’ll want to confirm:

• what assets are included (and excluded)
• whether any finance or leases are attached to key assets
• who owns what intellectual property (often the franchisor, not the franchisee)
• whether key contracts can be assigned to you (for example, the site lease)

Understand The Real Ongoing Costs

Beyond your initial franchise fee or purchase price, franchising often includes:

• royalties (often a percentage of gross revenue)
• marketing or brand fund contributions
• software, POS and tech fees
• training costs (initial and ongoing)
• fit-out requirements and refurbishment obligations

Make sure you have a clear picture of what’s mandatory and what’s optional. Even if something is described as “recommended”, it may be practically required to stay compliant with the system.

Check The Territory, Exclusivity And Competition Rules

One of the biggest business risks is assuming you have “your area” locked down, only to find the franchisor can:

• open another franchise nearby
• operate online sales that compete with you
• sell through supermarkets, delivery apps, marketplaces or corporate channels

Territory rights, exclusivity, and the franchisor’s reserved rights should be checked carefully against how customers actually buy in your industry.

Step 2: Review The Franchise Documents (This Is Where Most Of The Risk Lives)

Buying a franchise in Australia usually means you’ll receive a bundle of documents to review. The franchise agreement is the core, but it’s rarely the only document that matters.

Common documents include:

• Franchise agreement: the main contract setting out your rights, obligations, fees, and operating rules.
• Disclosure document: information the franchisor provides to help you make an informed decision.
• Franchisee manual / operations manual: the “how to run the business” rules (often updated by the franchisor over time).
• Site lease or occupancy arrangement: your right to occupy the premises (which may be directly with the landlord or through the franchisor).
• Supply and purchasing rules: approved suppliers, mandatory products, pricing controls, rebates, and logistics.

If you’re buying an existing site, you’ll also need the business sale documents and transfer approvals, as well as any deed documents the franchisor requires as a condition of transfer.

Getting a Franchise Agreement Review is usually one of the most cost-effective ways to identify the clauses that can cause real problems later - especially around termination, renewal, restraints and fees.

Key Clauses To Pay Close Attention To

Every franchise system is different, but these areas often drive disputes and financial stress:

• Term and renewal: how long you’re locked in for, whether renewal is guaranteed, and what conditions apply (including refurbishments and performance tests).
• Fees: royalties, marketing levies, audit costs, penalties, training fees, technology fees and “pass-through” costs.
• Performance and KPIs: whether the franchisor can require you to meet minimum sales targets and what happens if you don’t.
• Restraint of trade: what you’re prevented from doing after you exit (location, industry and time limits).
• Termination and default: what counts as a breach, what notice must be given, and whether the franchisor can terminate quickly in serious situations.
• Transfer rules: what happens if you want to sell - including approval rights, transfer fees, and mandatory training for buyers.
• Dispute process: what steps must be taken before court action (often negotiation/mediation requirements).

These aren’t just “legal details” - they affect whether you can run, grow, sell, or exit the business in a commercially realistic way.

Step 3: Choose Your Business Structure And Set Up The Ownership Properly

When you’re focused on buying a franchise in Australia, it’s easy to treat business structure like an admin task. But choosing the right structure can affect your personal risk, tax outcomes, and what the franchisor will require from you (including personal guarantees).

Common Structures For Franchisees

• Sole trader: simple to set up, but you (personally) are generally responsible for debts and liabilities.
• Partnership: can work for two or more owners, but disputes and shared liability can be a big risk without the right documentation.
• Company: often preferred for risk management and scalability (though directors still have obligations, and personal guarantees are common in franchising).

If you’re setting up a company (or already have one), you’ll also want to consider whether you need a Company Constitution - especially if there are multiple owners or you want clearer governance rules than the default replaceable rules.

If You’re Buying With A Business Partner, Don’t Skip The “Relationship Rules”

Franchises often involve big upfront investment, long hours, and stress - which is exactly where co-owner disputes can surface.

If you’re buying with someone else (friend, spouse, family member, investor), consider putting a Shareholders Agreement in place. It can cover:

• ownership split and capital contributions
• who makes day-to-day decisions vs major decisions
• what happens if one owner wants to exit
• deadlock resolution
• what happens if someone can’t work due to illness or other circumstances

This is one of those documents you’re glad you have when things don’t go to plan.

Step 4: Lock In The Premises, Finance And Key Third-Party Contracts

Most franchise failures aren’t caused by one single issue - they happen when a few big commitments stack up: lease obligations, staffing costs, fit-out debt, and franchise fees.

From a legal perspective, your goal is to make sure the “big commitments” match your actual rights and timeline.

Premises And Leasing

If the franchise is site-based (retail, hospitality, health, services), the lease terms can make or break your cash flow.

Key questions include:

• Are you leasing directly from the landlord, or is there a head lease with the franchisor?
• How long is the lease term compared to the franchise term?
• Are there demolition, relocation, make-good, or refurbishment obligations?
• Can the lease be assigned if you sell?

It’s often worth getting the lease reviewed at the same time as the franchise agreement so your obligations align commercially.

Finance And Security Interests (PPSR Checks)

If you’re buying an existing franchise business, you’ll want to know whether assets are subject to finance (for example, equipment under a secured loan or lease).

In Australia, many lenders register security interests on the Personal Property Securities Register (PPSR). A check can help you avoid paying for assets that are encumbered.

Depending on the deal, you may also be asked to sign personal guarantees, indemnities, or enter into finance arrangements that affect your personal assets. This is another area where tailored advice can significantly reduce unpleasant surprises.

Step 5: Get Your Compliance And Legal Documents Ready Before Opening Day

Once you sign, it can be tempting to focus purely on fit-out, hiring and marketing - but compliance gaps early on are where disputes and penalties often start.

Even within a franchise system, you still run your own business. That means you’re responsible for meeting your legal obligations, not just following the operations manual.

Australian Consumer Law (ACL) Still Applies To You

Franchisees must comply with the Australian Consumer Law (ACL) in the same way any other business does - including rules around misleading or deceptive conduct, advertising, refunds, and consumer guarantees.

This is especially important if you’re running local promotions, handling complaints, or advertising pricing online.

Employment Law If You’re Hiring Staff

Many franchisees hire quickly, sometimes casually and under pressure - but mistakes with pay rates, rosters, and entitlements can become expensive fast.

If you’ll be hiring, it’s worth having a compliant Employment Contract (and the right workplace policies) so expectations are clear from day one.

Privacy And Customer Data (Especially If You Have Online Bookings Or Marketing Lists)

If you collect personal information - names, emails, phone numbers, booking details, delivery addresses, loyalty program info - you should consider your privacy compliance.

A properly drafted Privacy Policy is a common requirement for businesses with websites, apps, online ordering, or digital marketing.

The Contract You’ll Need With Customers

Even if the franchisor provides standard templates, you should confirm the documents actually suit what you do locally (and that they’re consistent with the law and your sales channels).

For many service-based franchises (cleaning, repairs, health and wellbeing, education), a clear Customer Contract can help you manage disputes about scope, cancellations, payment terms, and liability.

For online sales, bookings, or platform-style offerings, your website terms and checkout terms become just as important as what you say in-store.

Key Takeaways

• Buying a franchise in Australia isn’t just purchasing a business - it’s entering an ongoing legal relationship governed by a franchise agreement, disclosure obligations, and the Franchising Code of Conduct (a mandatory industry code under the Competition and Consumer Act 2010 (Cth)).
• Your due diligence should cover the deal structure, territory rights, ongoing fees, supply restrictions, and whether the franchisor can compete with you through other channels.
• The franchise agreement is where most long-term risks sit, particularly around renewal, termination, restraints, performance requirements, transfer rights and unexpected fees.
• Setting up the right business structure (and documenting co-ownership clearly) can help protect you and reduce disputes as you grow.
• Don’t forget your “operational legal” foundations - consumer law, employment compliance, privacy compliance and customer terms often become issues early if they’re not handled properly.
• Getting legal advice before you sign can be the difference between buying a franchise you can grow - and inheriting a set of obligations you can’t realistically manage.

If you’d like help with buying a franchise in Australia - including reviewing the franchise agreement, transfer documents, or setting up the right structure - you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.