Buying a franchise

Buying a franchise is a big decision. It is important you understand your rights and what you can expect to happen throughout this process. It is also important to understand that the law cannot ensure the success of the business or that your money is always protected.

Changes to the Franchising Code

The Franchising Code (the Code) has been amended, with many of the changes commencing on 1 July 2021. The information on this page has not yet been updated to reflect these changes. A summary of the key changes to the Code is available.

What is franchising?

Franchising is a model for doing business. When you enter a franchise agreement, the franchisor controls the name, brand and business system you are going to use. The franchisor grants you the right to operate a business in line with its system, usually for a set period of time. Your franchise agreement will tell you what will happen at the end of this period, and in some instances you might not able to keep your franchise business.

  • Franchisor: allows another business to use their brand or system to sell something
  • Franchisee: is the business allowed to use the franchisor’s brand and system to sell something
  • Franchise agreement: when you buy a franchise you will have a franchise agreement, which is a contract between a franchisor and a franchisee that says what you can and can’t do when you are running the franchise. You would usually 'enter' a franchise agreement by signing a written agreement, but a franchise agreement can be written, oral or implied.

If an agreement meets the definition of a franchise agreement it will be covered by the Franchising Code even if someone doesn’t call it a ‘franchise’.

The ACCC's role

There are laws that must be followed when franchising in Australia, including the Franchise Code of Conduct and the Australian Consumer Law.

The ACCC regulates the Code and in line with its Compliance and Enforcement Policy uses a range of tools to encourage compliance and prevent breaches of the Competition and Consumer Act and the Code. This includes business and consumer education, and working closely with stakeholders and other agencies.

The ACCC does not provide individual dispute resolution services. See resolving franchising disputes to find out more about individual dispute resolution and mediation services provided by other organisations.

See also: What we can & can't do for small business.

Before you enter a franchise agreement

There are certain documents a franchisor must give you before you enter a franchise agreement. There are also three very important steps you should take before you buy a franchise to help protect your investment.

Read our franchisee case studies on some of the risks and challenges you should understand and investigate.

As soon as you show a genuine interest in a franchise, franchisors must give you an Information Statement about franchising. The ACCC has translated this into Hindi, Chinese simplified and Chinese traditional.

  • Don’t be rushed into signing a franchise agreement and make sure you understand what you are agreeing to.
  • Don’t rely on what a franchise salesperson tells you. Ensure all claims are written down or preferably have them included in the franchise agreement.

The franchisor must also give you the documents listed below at least 14 days before you sign an agreement or make a non-refundable payment. This means you have at least 14 days to read them, you can take more time if you need it.

  • The Franchising Code of Conduct is an industry code that all franchisors and franchisees have to follow. The franchisor has to give you a copy of the Code.
  • A disclosure document is a document with information about the franchise. It should include information from the franchisor to help the franchisee make a reasonably informed decision about whether to buy the franchise. Certain information must be included even if it might make someone decide not to buy the franchise.
  • The franchise agreement (in its final form).

When reading these documents and getting independent advice look out for:

  • any supply restrictions on where you can buy essential goods for your franchise, for example, coffee beans for a café franchise.
  • the purchase price of the franchise (the franchise fee) and what it costs you to run the franchise (wages, electricity, rent and others).

Can I change my mind after I enter a franchise agreement?

Sometimes after making a big decision to buy a franchise, you might change your mind. You can do this within seven days after signing or paying money under the agreement (whichever comes first). This is often referred to as your right to ‘cool off’. If you buy a franchise but change your mind a year later, it might cost you a lot of money to end the franchise agreement early.

If you have paid some money to the franchisor and you change your mind within seven days, the franchisor can keep some of your money but only if:

  • this is included in your franchise agreement; and
  • if the money is for reasonable expenses.

For example, if they gave you some training about the franchise, the franchisor may be able to keep all or some of your money to pay for this.

The franchisor has to give you back the rest of your money within 14 days.

However, before you make any payments always check what reasonable expenses the franchisor will be keeping.

This right to terminate in the ‘cooling off’ period only applies to new franchise agreements and not renewals, transfers or extensions of term or scope of an existing franchise agreement.

Resources

  • There is useful guidance about preparing yourself for business at: Business.gov.au
  • You can also access our resources in a number of resources in Hindi, Chinese simplified and Chinese traditional
  • Franchising: is it for you? Franchisee case studies on some of the risks and challenges you should understand and investigate.
  • Before you buy a franchise Three very important steps you should take before entering a franchise agreement to help protect your investment.

Contact us

If you have a question about franchising or your rights, or if you believe there has been a breach of the Code or the Competition and Consumer Act 2010, you can contact us:

If English is not your first language, you can call the ACCC through our translating and interpreting service on 131 450 and ask for 1300 302 021.

You can also subscribe to our Franchising Information Network to keep up with the latest news and updates relevant to the franchising sector.

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