Franchising can be a powerful way to grow a business in Australia - or to launch your own business with an established brand and operating system behind you.
But it’s also one of those areas where the “business opportunity” and the “legal obligations” are tightly linked. If you’re thinking about franchising in Australia (either as a franchisor or a franchisee), it’s worth slowing down early and making sure you understand the rules, the documents, and the risks.
This guide is general information only and doesn’t take into account your specific circumstances. If you’re considering signing a franchise agreement (or rolling out a franchise model), it’s a good idea to get legal advice tailored to your situation.
In this guide, we’ll walk you through how franchising works in Australia in practical terms, what the Franchising Code of Conduct means for your business, and the key steps you should take before signing or rolling out a franchise model.
What Is Franchising In Australia (And Is It Right For Your Business)?
Franchising is a business arrangement where one party (the franchisor) grants another party (the franchisee) the right to operate a business using the franchisor’s brand, systems and support.
In return, the franchisee usually pays:
- Upfront fees (for example, an initial franchise fee)
- Ongoing fees (often called royalties)
- Marketing or brand fund contributions (in many networks)
From a small business perspective, franchising in Australia generally comes up in two ways:
1) You Want To Buy A Franchise (Become A Franchisee)
This can be appealing if you want a clearer roadmap than starting from scratch. You may get:
- a known brand
- set systems and training
- templates for marketing and operations
- ongoing support
But you’ll also be operating with restrictions - including rules about suppliers, territory, branding, and reporting. Pricing can be a sensitive area too: some systems provide recommended prices or run promotions, but franchisors generally need to be careful not to require minimum resale prices (as this can raise resale price maintenance risks under Australian competition law). The franchise agreement is typically detailed and long-term.
2) You Want To Franchise Your Business (Become A Franchisor)
If you’ve built a strong, repeatable business model, franchising can be a pathway to expansion without funding and running every new site yourself.
However, becoming a franchisor in Australia isn’t just a “growth strategy” - it’s a compliance-heavy structure with strict documentation and disclosure obligations. If your model isn’t yet systemised, franchising can create more operational and legal pressure than you expect.
A good general test is: can your business be replicated consistently by someone else (who is capable and motivated, but not you) with training, manuals and support?
How Does The Franchising Code Of Conduct Affect You?
Franchising in Australia is regulated under the Franchising Code of Conduct (the Code), which sits under the Competition and Consumer Act 2010 (Cth).
The Code is designed to improve transparency and fairness in franchise relationships. It does this by setting rules about:
- what must be disclosed before a franchisee signs
- cooling-off rights
- good faith obligations
- dispute resolution processes
- end-of-term and renewal issues
If you’re a franchisor, you can’t “contract out” of the Code by writing around it. If the arrangement is considered a franchise under Australian law, the Code obligations usually apply.
Good Faith: What It Means In Practice
The Code requires parties to act in good faith in relation to the franchise agreement and the Code itself.
“Good faith” doesn’t mean you must always agree with the other side, or put their interests ahead of yours. But it generally means you should act honestly and not undermine the purpose of the franchise relationship.
For example, if you’re a franchisor, you’ll want to be careful about major system changes, site approvals, or enforcement decisions - and ensure your decisions are consistent, properly documented, and not arbitrary.
A common mistake (on both sides) is treating disclosure paperwork as something you tick off at the last minute.
Under the Code, franchisors generally need to give franchisees key pre-contract documents (including a disclosure document, a copy of the franchise agreement in the form it will be signed, and other required information) at least 14 days before the franchisee signs or pays any non-refundable money. Franchisees also typically have a cooling-off period (commonly 14 days) after entering into the agreement (or paying money) to change their mind, subject to the Code’s rules.
If you’re a franchisee, the disclosure process is often your best opportunity to understand the network before you commit. If you’re a franchisor, the disclosure process is one of the biggest compliance risks if mishandled.
Getting legal advice early can help ensure your approach is not only compliant, but also commercially sensible.
Key Legal Documents You’ll See In Franchising (And What They Actually Do)
Franchising is document-heavy for a reason: the documents define the relationship, the business rules, the money flows, and what happens if something goes wrong.
While every franchise system is different, these are some of the core documents you’ll typically deal with when franchising in Australia.
Franchise Agreement
This is the main contract that governs the relationship. It will usually cover:
- term length, renewal rights, and exit rules
- fees (initial, ongoing, marketing contributions, and other charges)
- territory and exclusivity (if any)
- brand and IP rules (how the franchisee can use the brand)
- operational requirements (systems, suppliers, training, reporting)
- default, breach and termination rights
If you’re joining a network, a Franchise Agreement Review can help you understand where the main risks sit before you sign.
Disclosure Document
The disclosure document is a required pre-contract document under the Code (in many cases). It’s intended to give franchisees visibility on key issues such as fees, litigation history, financial and operational matters, and the franchise network.
For franchisors, keeping disclosure documents accurate and updated is critical. For franchisees, it’s a document you should read carefully and cross-check against what you’ve been told verbally.
Operations Manual (And System Policies)
Most franchise systems have an operations manual that sets out how the franchisee must run the business day-to-day.
Legally, this matters because many franchise agreements:
- require the franchisee to comply with the manual, and
- allow the franchisor to update the manual from time to time
That means your “rules of the game” can change during the franchise term (within limits). You should understand how much power the franchisor has to impose changes and what consultation is required.
Intellectual Property (Brand, Trade Marks, And Know-How)
At the core of franchising is brand value. Franchisors need to properly protect the business name, logos, and other distinctive brand assets.
If you’re expanding, it’s often worth checking that your IP position is strong before you franchise - because if your brand isn’t protected, you can end up with disputes that impact the entire network.
Depending on the model, you might also see:
- leases for premises (sometimes signed by the franchisee, sometimes by the franchisor, sometimes with guarantees)
- supply agreements or required supplier arrangements
- fit-out obligations and funding arrangements
These “side documents” can be just as important as the franchise agreement itself, because they often carry long-term financial commitments.
A Step-By-Step Guide To Franchising In Australia (Franchisee Vs Franchisor)
There’s no single “right” way to approach franchising in Australia, but there are practical steps that can help you reduce risk and make better decisions.
If You’re Buying A Franchise (Franchisee)
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Clarify what you’re actually buying
Are you buying a new franchise, buying an existing franchise business from a current franchisee, or entering a trial arrangement? Each option can involve different documents and risks.
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Review the disclosure and financials carefully
Look at initial and ongoing fees, marketing contributions, required purchases, and any refurbishment obligations. Consider getting accounting advice as well as legal advice.
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Understand your restrictions (and your obligations)
Franchisees often have less flexibility than independent business owners. Make sure you’re comfortable with supplier restrictions, brand rules, KPI reporting, and operational controls.
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Check territory and competition issues
Territory rights vary widely. Some franchisees have exclusivity. Some don’t. You want clarity on whether another franchisee (or a company-owned store) can open nearby.
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Get the contract reviewed before you sign
This is one of those moments where “signing now and sorting it out later” can be very expensive. A Franchise Agreement Review helps you go in with your eyes open.
If You’re Franchising Your Business (Franchisor)
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Confirm your model is franchise-ready
If your profitability depends on your personal involvement, or you don’t have consistent systems, franchising can scale problems faster than it scales success.
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Structure your business properly
Many franchisors operate through a company for liability and growth reasons, but the right structure depends on your goals and risk profile. You may also need governance documents like a Company Constitution.
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Build your documents and compliance processes
This includes the franchise agreement, disclosure documents, manuals, and processes to keep them updated. If you’re drafting or updating franchise documents, a Franchise Agreement tailored to your model is a key foundation document.
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Protect your IP and brand early
If franchisees are paying for your brand and system, your legal protection needs to match that value. That often means trade mark protection and tight brand usage rules.
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Plan for disputes and exits (before they happen)
Franchise relationships can be long-term and high-stakes. Clear dispute resolution processes, clear breach and termination clauses, and fair processes can reduce the chance of conflict escalating.
Common Legal Issues In Franchising (And How To Reduce Risk Early)
Franchising in Australia can work really well when expectations are clear and the system is robust. Many disputes arise when the commercial reality doesn’t match the paperwork - or when the paperwork isn’t clear enough.
Here are some of the most common pressure points we see.
Franchisees often want to know: “How much will I make?” Franchisors want to grow: “How quickly can we expand?”
Legally, representations about earnings can be risky. You should be careful about what is promised verbally in sales discussions, and make sure the disclosure and franchise documents are consistent.
This ties closely into avoiding misleading or deceptive conduct under the Australian Consumer Law (ACL) and broader consumer protection principles.
Marketing Fund Confusion
Marketing or advertising funds can be a sensitive topic. If franchisees are contributing, you want clarity on:
- how contributions are calculated
- who controls spending
- reporting obligations
- how funds can (and can’t) be used
Transparency here helps protect trust across the network.
Who Employs Staff (And Who Is Liable)?
Most franchise models are structured so franchisees employ their own staff. But even then, the franchisor can still face risks if the system design or controls contribute to non-compliance.
If you’re a franchisee, it’s still on you to comply with employment laws - including having proper contracts and payroll compliance. If you’re employing staff, an Employment Contract is a practical starting point to clearly set out duties, pay conditions, and expectations.
Termination And Exit Pain Points
Most franchise agreements include detailed termination rights. The practical question is: what happens to you (and your investment) if the agreement ends early, or if you want to sell?
You’ll want to look closely at:
- restraint clauses (what you can do after you exit)
- de-identification obligations (removal of branding)
- handover procedures
- transfer rules if you sell the business
These clauses matter most when things don’t go to plan - which is exactly why it’s worth checking them upfront.
What Other Laws Do You Need To Comply With When Franchising In Australia?
The Code is central, but it’s not the only legal framework you’ll be dealing with. Franchising usually sits on top of broader business law obligations.
Australian Consumer Law (ACL)
Whether you’re a franchisee selling to customers, or a franchisor marketing the franchise opportunity, the ACL matters.
This includes rules about misleading or deceptive conduct, unfair contract terms (in some contexts), and customer guarantees for goods and services.
Privacy And Data
Many franchise systems collect personal data through websites, apps, loyalty programs, and marketing campaigns. If you collect personal information, you’ll likely need to think about privacy compliance and data handling practices.
Even for a small business, having a properly drafted Privacy Policy can be a key part of building trust and meeting legal expectations (especially if you operate online).
Business Structure And Founder Arrangements
If you’re a startup building a franchise system, it’s common to have co-founders or investors involved.
Make sure the ownership and decision-making rules are clear early - particularly around IP ownership, roles, and what happens if someone exits. A Shareholders Agreement can help set expectations and reduce disputes as you scale.
Leasing And Premises Issues
If the franchise is location-based (like retail, hospitality, fitness, or services), the lease can make or break your success.
Key questions include:
- Who signs the lease (franchisee or franchisor)?
- Are there personal guarantees?
- What happens to the lease on exit, termination, or transfer?
- Are there fit-out and make-good obligations?
Franchise agreements and leases should “match” commercially - otherwise you can end up stuck in a lease after the franchise relationship ends.
Online Terms (If You Sell Or Operate Online)
Many franchise businesses sell online, take bookings online, or operate platforms for customers. If your business has an online presence, you’ll usually want clear website terms and customer terms to manage expectations and reduce disputes. For example, a Website Terms and Conditions document can help set the rules for how your online services are used.
Key Takeaways
- Franchising can be a smart growth strategy (as a franchisor) or a structured way to start a business (as a franchisee), but it comes with strict rules and long-term commitments.
- The Franchising Code of Conduct sets major obligations around disclosure, cooling-off, good faith, and dispute resolution - and it applies even if a contract tries to “write around” it.
- The franchise agreement and related documents (disclosure document, manuals, leases, supply arrangements) determine how the business runs and what happens if things go wrong.
- Franchisees should focus on fees, restrictions, territory rights, and exit/transfer rules before signing - not after.
- Franchisors should make sure their business is systemised, their IP is protected, and their legal documents and compliance processes are built to scale.
- Beyond the Code, franchising also intersects with broader obligations like the Australian Consumer Law, employment compliance, privacy, and leasing.
If you’d like a consultation about franchising in Australia - whether you’re buying a franchise or franchising your own business - you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
This article is general information only and is not legal advice. If you need advice about your specific situation, you should speak to a lawyer.
