Starting a franchise can be an exciting way to grow a business that already works.
If you’ve built a product or service that customers love (and you’re thinking, “we could open five more locations tomorrow if we had the right people running them”), franchising can look like the obvious next move.
But when you Google how to start a franchise, most advice focuses on operations and marketing. The legal side is often treated like an afterthought, even though franchising is one of the most regulated ways to expand a business in Australia.
Below, we’ll walk you through how to start a franchise step-by-step, with a focus on setting up a franchising model that is legally compliant, commercially practical, and scalable.
What Does It Mean To Start A Franchise (And Is Your Business Ready)?
When you franchise your business, you (the franchisor) grant other business owners (the franchisees) the right to operate under your brand and system.
In exchange, franchisees usually pay an upfront franchise fee and ongoing fees (often a royalty, marketing levy, and other contributions). In return, you provide things like:
- your brand name and brand assets
- your business system and “know-how” (how you do things)
- training and support
- rules and standards designed to keep the network consistent
Before you move into the legal setup, it’s worth asking a practical question: can your business be replicated consistently by others?
Some signs you may be ready to franchise include:
- your business model is profitable and proven (ideally across more than one site or market)
- your customer experience is consistent and not dependent on one person’s “magic touch”
- you have systems that can be documented (training, operations, supply chain, quality control)
- your brand is distinctive and protectable (more on this below)
- you’re ready to support franchisees over the long term (not just sell a franchise and walk away)
Even if you’re still refining your processes, you can start preparing now. A lot of the legal groundwork (like IP protection and company structuring) is valuable whether you franchise next month or next year.
Step-By-Step: How To Start A Franchise In Australia
If you want the simplest framework for how to start a franchise, think of it as moving through three stages:
- Build the foundation (structure, brand, systems)
- Build the legal franchise package (documents and compliance)
- Launch and manage the network (onboarding and ongoing obligations)
1. Choose The Right Business Structure For Franchising
Many franchisors operate through a company structure because it can offer clearer governance and a level of separation between the business and the owners (depending on your circumstances).
For example, franchising involves:
- ongoing contractual relationships with multiple franchisees
- brand and reputation risk
- potential disputes that need to be handled consistently
- growth planning (new sites, new states, possibly international expansion)
It’s common to set up (or restructure into) a company before franchising, and to make sure the ownership and decision-making arrangements are documented properly. If you’re considering a new entity as part of your franchise rollout, Company Set Up is often one of the first steps.
2. Make Sure You Own (And Can License) Your Brand And IP
Your franchise is built on your brand. If you don’t have legal control over your brand name, logo, or key assets, it’s difficult (and risky) to license those rights to franchisees.
At a minimum, you should consider:
- Trade marks for your brand name and logo (and possibly your tagline)
- Copyright ownership in marketing materials, manuals, and training content
- Domain names and social handles aligned with the brand
In practice, registering your brand as a trade mark helps you enforce consistent brand usage across the franchise network and reduce the risk of copycats. If brand protection is on your to-do list, register your trade mark early, ideally before you start recruiting franchisees.
3. Document Your System (Operations Manual And Training)
Your franchise agreement will tell franchisees what they must do, but your operations manual is what tells them how to do it.
This is not just an operational document. It’s part of how you protect your IP and maintain consistency across the network.
A well-built manual often covers:
- brand standards (visuals, tone of voice, approved marketing)
- site requirements and fit-out standards
- suppliers and purchasing rules
- customer service and complaint handling
- staffing expectations and training requirements
- health and safety processes (where relevant)
- technology systems (POS, booking systems, CRM)
- opening/closing procedures and quality control
From a legal perspective, you’ll want to make sure your franchise documents and manual work together, and that the manual can be updated over time without creating ambiguity.
4. Build Your Franchise Model (Fees, Territory, Term, Support)
Before you draft legal documents, you should be clear on the commercial structure you’re offering. This is where many franchisors get stuck, because what seems “standard” in one industry can be unusual in another.
Key questions include:
- What is your upfront franchise fee?
- Will royalties be a fixed fee, a percentage, or tiered?
- Is there a marketing fund contribution (and how is it controlled)?
- Will you grant exclusive territories, non-exclusive territories, or no territory?
- What is the franchise term (and are renewals automatic or conditional)?
- What training and ongoing support will you provide?
- What KPIs and reporting will you require?
- What are the exit rules (sale, transfer, termination)?
When you’re thinking about how to start a franchise, this stage matters because the legal documents should reflect a model that is commercially workable, not just “legally sound on paper.”
5. Prepare Your Franchise Documents (This Is The Core Legal Step)
In Australia, franchising is regulated and document-heavy for a reason: franchisees are investing time and money into your system, and the law expects transparency and fairness in the relationship.
As a franchisor, your key document is the Franchise Agreement, which sets out the rights and obligations between you and each franchisee.
In most cases, you’ll also need a disclosure document and other supporting documents (including the mandatory Information Statement and Key Facts Sheet under the Franchising Code of Conduct). Just as importantly, you’ll need a clear process for giving franchisees the right documents at the right time.
6. Recruit Franchisees Carefully (And Keep Your Process Consistent)
Franchise recruitment is not just a sales process. It’s also a legal risk area.
You’ll want to ensure you’re not making statements that could later be alleged to be misleading (for example, about expected earnings or how quickly a franchise will become profitable). If you provide forecasts or “typical results,” those need to be handled carefully and backed by evidence.
A practical tip: document your recruitment process, use consistent written materials, and don’t rely on casual verbal promises to close a deal.
7. Set Up Ongoing Compliance Systems
Franchising isn’t “set and forget.” Your obligations continue after signing.
You’ll need processes for:
- handling disputes (including good faith negotiation and record-keeping)
- keeping marketing fund records (if applicable), including preparing annual financial statements (and arranging an audit if franchisees request it in accordance with the Code)
- supporting franchisees with training and updates
- audits and quality assurance
- keeping disclosure documentation up to date (including the Code’s annual update requirements)
- renewals, transfers, and exits
When you’re mapping out how to start a franchise, build these systems early, because they’re much harder to bolt on after you’ve signed multiple franchisees.
What Laws Do You Need To Follow When Starting A Franchise In Australia?
Franchising in Australia is regulated under the Competition and Consumer Act 2010 (Cth) and the Franchising Code of Conduct.
The Code impacts how you advertise your franchise, what you must disclose, how disputes must be handled, and what rights franchisees have in certain situations.
While the full compliance picture depends on your franchise model, there are a few legal areas small business franchisors should always keep front of mind.
Franchise Disclosure And “Cooling-Off” Requirements
Franchisees must receive certain documents before they sign or pay anything, and there are strict timing rules around when those documents must be provided.
In general, you will need to give prospective franchisees the Code’s prescribed documents, which typically include:
- the Information Statement (in the format required by the Code)
- the Key Facts Sheet (in the format required by the Code)
- the Disclosure Document
- the Franchise Agreement (in the form it will be signed)
These documents generally need to be provided at least 14 days before the franchisee enters into the franchise agreement or makes a non-refundable payment under the agreement.
There are also cooling-off rights in many circumstances. In general, franchisees have a 14-day cooling-off period after entering into the franchise agreement (or paying money under the agreement, whichever happens first), so your onboarding and payment process needs to be structured carefully.
If you’re planning to scale quickly, it’s especially important to get the process right from day one, because inconsistencies between franchisees can become a major legal and relationship issue later.
Australian Consumer Law (ACL) And Marketing Claims
Even though a franchise relationship is business-to-business, your marketing and sales conduct is still subject to rules around misleading or deceptive conduct.
This becomes particularly relevant when you’re recruiting franchisees. Statements like “you’ll make your money back in six months” or “this location will definitely hit $X revenue” can create risk if they aren’t accurate or properly supported.
Employment Law (If You Have Staff Or Provide Hiring Requirements)
You might have employees at your head office (or in corporate stores), and franchisees will often employ staff too.
While franchisees are generally responsible for their own employees, franchisors commonly set brand and training standards that influence how staff are managed. That makes it important that your franchise system doesn’t accidentally encourage non-compliance.
If you’re employing staff in your own business, an Employment Contract helps set clear expectations around duties, pay arrangements, confidentiality, and termination.
Privacy And Data Handling (Especially If You Use A Shared CRM Or Loyalty Program)
Many franchise networks collect customer data through online bookings, loyalty programs, email marketing, and delivery apps.
If you’re collecting personal information, you’ll need to think about:
- who “owns” the customer relationship and database
- who can access customer data within the network
- how consent is obtained and recorded
- what happens to data when a franchisee exits
Having a clear Privacy Policy is a common starting point, but franchising often requires extra thought around data sharing and control across multiple businesses.
Intellectual Property (IP) Protection And Brand Control
Franchising only works if you can enforce brand consistency and stop unauthorised use of your system.
This usually means ensuring:
- your key brand assets are protected (often via trade marks)
- your franchise agreement includes clear IP licence terms
- your operations manual and training materials are treated as confidential
- there are practical enforcement tools if a franchisee misuses the brand
What Legal Documents Do You Need To Start A Franchise?
This is where your franchise becomes “real” from a legal perspective. Strong franchise documentation protects your brand, sets expectations, and reduces the risk of disputes as you grow.
Not every franchise network is identical, but most small business franchisors will need a combination of the following documents.
- Franchise Agreement: This sets out the legal relationship between you and the franchisee, including fees, term, territory, training, system compliance, dispute processes, and exit rights. A properly drafted Franchise Agreement should match how you actually plan to run the network.
- Disclosure Document: This is required under the Franchising Code and is designed to give franchisees key information to help them make an informed decision (including fees, key risks, and network details). Disclosure documents must also be kept updated in line with the Code’s timing requirements.
- Information Statement and Key Facts Sheet: These are also prescribed documents under the Franchising Code, and they must be provided at the correct time as part of a compliant franchise sales process.
- Operations Manual: While not always a “legal document” in the traditional sense, it’s a core part of your franchise system and is often incorporated by reference into the franchise agreement. It should be clear, practical, and updateable.
- Trade Mark And IP Strategy: Many franchise disputes come back to brand usage and ownership. It’s much easier to franchise when you’ve already taken steps to register your trade mark and clearly define how franchisees can (and can’t) use your brand.
- Confidentiality / NDA: Before you share detailed manuals, supplier terms, or financial insights with potential franchisees, a Non-Disclosure Agreement can help protect your confidential information during early conversations.
- Company Governance Documents: If you’re expanding with co-founders, investors, or multiple directors, your internal documents matter too. A Shareholders Agreement can help manage decision-making, exits, and funding as the franchise network grows.
One important point: franchise documents should be treated as a complete package. If your agreement says one thing, your marketing says another, and your operations manual implies something else, that inconsistency can create avoidable disputes.
Common Pitfalls When Starting A Franchise (And How To Avoid Them)
When small business owners look into how to start a franchise, a few issues come up again and again. The good news is that most of them are avoidable with planning and the right legal setup.
Rushing Into Franchising Before Your Model Is Repeatable
If your business “works” because you personally oversee everything, franchising may expose gaps in your system quickly.
Before signing franchisees, invest time in documenting your processes, building training, and testing what happens when someone else runs the day-to-day.
Being Too Loose With Earnings Claims
It’s natural for potential franchisees to ask, “how much can I make?” But profitability depends on location, costs, management, and market conditions.
Be careful about promises. Build your recruitment process around accurate, supportable information and clear disclaimers, and keep records of what you provided.
Using Templates That Don’t Match Your Business
Franchise documents are not “one size fits all.” A franchise agreement that’s borrowed from another industry (or another country) may not reflect how your business actually operates, and may create obligations you can’t realistically meet.
This is also where compliance issues can creep in, particularly around disclosure and process requirements (including the Information Statement, Key Facts Sheet, and the 14-day timing rules).
Not Protecting Your Brand Early Enough
Your brand is the asset you are licensing. If you wait until after you’ve started recruiting franchisees to protect your IP, you can end up having to rebrand later, or deal with conflict if someone else registers a similar trade mark.
Trade marks are often an early, practical step that supports long-term franchise growth.
Not Planning For Franchise Exits And Disputes
Even in healthy networks, exits happen. Franchisees sell, retire, change direction, or sometimes breach the agreement.
You want your documents and processes to clearly cover:
- how transfers work (including approval and training requirements)
- what happens if a franchisee stops following the system
- how disputes are escalated and managed (including good faith obligations and Code processes)
- what happens to customer data, marketing accounts, and branding on exit
Setting these expectations early can protect your network culture and reduce the risk of messy disputes later.
Key Takeaways
- Learning how to start a franchise is about more than growth plans - in Australia, franchising comes with specific legal obligations and prescribed documents under the Franchising Code of Conduct.
- Before franchising, make sure your business model is repeatable, your systems are documented, and your brand assets can be legally licensed to franchisees.
- Your business structure matters, and many franchisors consider a company structure to support governance, expansion, and risk management.
- A compliant franchise rollout usually requires a tailored franchise agreement, a disclosure document, the mandatory Information Statement and Key Facts Sheet, and an operations manual that aligns with how you actually run the business - plus a signing process that follows the Code’s timing requirements (including the 14-day disclosure period and the cooling-off period rules).
- Key legal risk areas include franchise disclosure requirements, Australian Consumer Law (especially around recruitment claims), employment compliance, privacy/data management, and IP protection.
- Getting the legal foundations right early can help you scale with confidence and avoid costly disputes as your franchise network grows.
If you’d like a consultation on starting a franchise in Australia, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
