Franchise Law FAQ

The Franchising Code is a mandatory industry code under Part IVB of the CCA. It regulates pre-agreement disclosure, the content of franchise agreements, dispute resolution, and termination. Breach is an ACCC enforcement matter attracting civil penalties.

An agreement under which one party (franchisor) grants another (franchisee) the right to carry on a business under a system substantially determined or controlled by the franchisor, using a mark or commercial symbol owned or controlled by the franchisor, with payment of a fee.

A disclosure document is a structured document the franchisor must give a prospective franchisee at least 14 days before the franchisee enters the agreement or pays non-refundable money. It contains 23 items of prescribed disclosure, updated annually.

Since 1 April 2025, the cooling-off period is 14 days from the date a new franchisee enters the franchise agreement or makes a payment, whichever is earlier. The franchisee can terminate and recover payments less reasonable expenses.

At least 14 days before the franchisee enters or renews the agreement, or pays non-refundable money. The franchisor must also update the disclosure document within 4 months after the end of its financial year.

A prescribed short document the franchisor must give to a prospective franchisee as soon as practicable once the franchisor knows the person is considering entering the franchise. It sits alongside the disclosure document and is designed to draw attention to key risks.

Parties to a franchise agreement, and prospective parties, must act in good faith towards each other in respect of matters arising under the agreement or the Code. Breach can attract civil penalties. The obligation cannot be contracted out of.

Yes, if the agreement provides for it. The franchisor must maintain a separate marketing fund, prepare annual financial statements, and audit them unless at least 75% of franchisees vote against audit. Expenses must be used for marketing of the franchise system generally.

Termination for breach requires reasonable notice and an opportunity to remedy (for remediable breaches). Termination for specific grounds (fraud, insolvency, licence loss) can be without notice, subject to the Code's listed special circumstances. Termination without cause requires fair compensation under the 2025 Code.

Yes. Since 1 April 2025, termination without cause triggers a fair compensation requirement. The Code also regulates end-of-term procedures, goodwill restraints, and inventory buyback. Unfair contract terms in the agreement are subject to the UCT regime.

The 14-day cooling-off period also applies to transfers of a franchise agreement (incoming franchisee). The outgoing franchisee and franchisor should plan for this in any sale transaction and ensure disclosure is current.

The franchisor must not unreasonably withhold consent to transfer. The Code sets out grounds on which consent can be withheld. The franchisor must respond within 42 days, and silence operates as deemed consent.

The franchisor must give notice at least 6 months before the end of the term of whether it intends to extend or renew. Failure to give notice triggers prescribed consequences including potential renewal on the existing terms in some cases.

The Code mandates an internal dispute resolution process and an ADR step through the Australian Small Business and Family Enterprise Ombudsman before litigation. Since 2021, parties can agree to binding arbitration at the ASBFEO's direction.

Most Code obligations are penalty provisions. Penalties run to 600 penalty units per contravention for corporations (indexed). Executive liability provisions apply. The ACCC is the primary enforcement agency, with follow-on private actions possible.

A post-termination clause restricting the former franchisee from operating a competing business. Enforceability depends on reasonableness — scope (activity, territory, time). The Code does not prohibit them but general law tests apply.

Disclosure document, Information Statement, the franchise agreement and all ancillary documents, the franchise system operations manual summary, financial accounts and projections, site documentation, and any personal guarantees proposed. Quillio can cross-reference the disclosure document against the agreement to flag inconsistencies.

From introduction to execution, 8–16 weeks is typical given the 14-day disclosure period, financial advice, legal advice, site approval, and funding. Transfers are often faster if the system is mature.

Franchisee pre-sign review: $2,500–$6,000. Franchisor disclosure and system documentation set-up: $20,000–$80,000. Dispute resolution: $25,000–$200,000+ through to decision. Simpler disputes can resolve in ASBFEO mediation.

Before signing anything — before the 14-day disclosure period ends, before paying any non-refundable money, and before agreeing to a lease or finance conditional on the franchise. The statutory warning "do not sign until you have independent advice" exists for a reason.