Consider this if…
- You have been given a disclosure document and a franchise agreement to sign
- You are within the cooling-off period and having second thoughts
- The franchisor has asked for a deposit before you have seen the agreement
- You are taking a lease for the site as well as the franchise
- You are buying an existing franchise from a departing franchisee
- Your franchise term is ending and you want to know whether you have to leave
How it works
Send us all three documents
The disclosure document, the franchise agreement, and the lease or licence for the site. They have to be read together — problems usually live in the gap between them rather than inside any one of them.
As soon as you receive them
We check the process was followed
Whether you were given what you were entitled to, when you were entitled to it. If the disclosure period was not observed, that matters and you should know before you sign, not after.
First thing we do
We read the agreement and the disclosure document
Fees and what they buy, territory and whether it is exclusive, term and renewal, supply arrangements, marketing fund contributions, transfer and exit, termination, and the restraint that applies once you leave.
3 business days
We read the lease against the franchise term
A lease that runs longer than the franchise, or shorter, is a problem in both directions. So is a lease held by the franchisor and licensed to you.
With the review
You get our view in writing
What you would be committing to, what it realistically costs across the term, what you can and cannot get out of, and which points are worth raising with the franchisor.
With the review
Fee
Quoted in writing before we start
GST inclusive
Excludes: If a site lease is involved it is quoted as part of the same job, not as an extra you discover later.
Quoted in writing before we start, covering all three documents together.
Turnaround
Our written view back to you within three business days, and faster if you are inside a cooling-off period.
Three documents, read together
A franchise purchase is not one transaction. It is a franchise agreement, a disclosure document, and almost always a lease or a licence to occupy premises. Each is drafted by someone whose interests are not yours, and the problems usually sit in the relationship between them rather than inside any one.
A franchise term of five years against a lease of three. A lease held by the franchisor with you as licensee. Supply obligations in the agreement that assume a site the lease does not secure. None of these show up if the documents are read separately, which is how they are usually presented.
The protections the Code gives you
The Franchising Code of Conduct applies to franchise agreements in Australia and gives a prospective franchisee two things that matter most:
Time before you sign. The franchisor must give you the disclosure document, a copy of the Code and the agreement a set period before you sign or pay non-refundable money. That period exists so you can take advice. It is not a formality and it is not the franchisor's to waive because the site is popular.
A cooling-off period after you sign. You can terminate within a set period of entering the agreement, with provisions governing what must be refunded. Cooling off can also apply where you have entered a lease in connection with the franchise.
The Code also requires both parties to act in good faith, restricts post-term restraints in some circumstances, requires a key facts sheet, and provides for dispute resolution — including through the Australian Small Business and Family Enterprise Ombudsman — before matters reach court.
Franchisors are also required to lodge information on a public disclosure register, which means some of what you are considering can be checked independently of what you have been told.
What we look for in the agreement
Fees, and what they actually buy. The initial fee, ongoing royalties, marketing fund contributions, technology and support charges, and any required refurbishment. Add them across the term rather than reading them as percentages — the total is the number the decision should turn on.
Territory. Whether you have one, whether it is exclusive, and whether the franchisor can open another outlet nearby, sell online into your area, or supply a wholesaler who does.
Term and renewal. How long you have, whether renewal is a right or a discretion, what it costs, and what you have to do to qualify. A five-year term with renewal entirely at the franchisor's discretion is a five-year business, and should be valued as one.
Supply. Whether you must buy from nominated suppliers, whether prices are controlled, and whether the franchisor takes a margin on what you are required to buy.
Transfer and exit. What happens when you want to sell. Whose consent you need, on what grounds it can be refused, what it costs, and whether the franchisor has a right of first refusal.
Termination. What the franchisor can terminate for, with what notice, and what happens to your fit-out, your stock and your site if they do.
The restraint. What you cannot do after you leave — what activity, in what area, for how long. This is the clause that determines whether leaving the system means leaving the industry.
What we look for in the disclosure document
The financial information about the franchisor. The list of current franchisees, and — more usefully — former ones, with the number who left and why. Any litigation. What the franchisor says about earnings, and how carefully it is hedged.
Then we suggest you call some of the former franchisees. It is the single most informative thing a prospective franchisee can do, and the disclosure document exists partly to make it possible.
If you have already signed
Tell us the date. The cooling-off period runs from it, and it is short. Within that window you have a straightforward right to terminate. Outside it, your options depend on whether the Code process was properly followed, on what you were told before you signed, and on what the agreement says — a much harder and slower conversation, but not always a hopeless one.
Acting for franchisors
We also act on the other side — drafting franchise agreements and disclosure documents, Code compliance, site leasing, transfers and terminations. We do not act for both parties to the same arrangement.
Where the franchise depends on a name, logo or other brand asset, we can also search, register and protect the relevant trade marks.
Frequently asked questions
How long do I have to consider a franchise agreement before signing?
The Franchising Code requires the franchisor to give you the disclosure document, the Code and the agreement a set period before you sign or pay any non-refundable money — currently 14 days. It exists precisely so you can get advice. If a franchisor is pressing you to sign sooner, that is worth noticing in itself.
Is there a cooling-off period after I sign?
Yes. The Code provides a cooling-off period after you enter a franchise agreement — currently 14 days — during which you can terminate. There are provisions dealing with what the franchisor must refund. Cooling off can also apply where you enter a lease in connection with the franchise. If you are inside that window and having doubts, tell us the date you signed, because it is the first thing that matters.
What is the difference between the disclosure document and the agreement?
The disclosure document tells you about the franchise system — the franchisor's financial position, existing and former franchisees, litigation, supply arrangements, and what you will be required to spend. The agreement is the contract you are bound by. Both matter, and they should be read against each other, because what the disclosure document describes is not always what the agreement obliges.
Can I be stopped from working in the industry after I leave?
Franchise agreements almost always contain a restraint that operates after the agreement ends, limiting what you can do, where, and for how long. The Code restricts post-term restraints in some circumstances. Whether a particular restraint is enforceable depends on how it is drafted and on the circumstances of the exit, and it is one of the clauses most worth understanding before you sign rather than after you want to leave.
The lease is in the franchisor's name and I am licensed to occupy. Is that a problem?
It is common and it is a genuine risk. It means your right to be in the premises depends on the franchise relationship continuing and on the franchisor performing under the head lease. If the franchise ends, or the franchisor defaults, your occupancy can go with it. It is not necessarily a reason not to proceed, but you should know it is the arrangement.
Do franchisors and franchisees need separate legal advice?
It is often appropriate for each party to obtain independent legal advice because their interests and obligations under the franchise arrangement may differ. We act for franchisees and for franchisors, but not for both sides of the same arrangement.
Related services
If you have already signed, tell us the date — the cooling-off period runs from it.
Send us the documents