Buying a franchise? Know the risks

If you're thinking about buying a franchise, it’s important that you understand whether it's right for you before making a final decision or signing a franchise agreement.

Just like any business, there are risks when running a franchise. If you buy a franchise business and it goes badly, you could lose all your money and any assets, such as your house, that you have borrowed against.

The information on this page includes online resources which have been translated into Hindi, Chinese simplified and Chinese traditional.

Videos

Here are some videos that explain some important things you should know about franchising.

Franchising steps

There are some key steps you should always take to know the risks before signing a franchise agreement or paying money. This includes understanding key documents, talking to other franchisees and ex-franchisees, and seeking professional legal, accounting and business advice from franchising experts.

Supplier restrictions

Some franchise systems require their franchisees to buy certain products from them or their specified supplier, known as supply restrictions. You might have no choice about where to buy some products.

Price vs. costs

The upfront price of a franchise may seem like a good deal, but there are also costs that you may have to pay to set up and run a franchise. It’s important to understand the total costs you may have to pay.

Publications

Franchising in Australia

Franchising is a model for doing business. When you enter into a franchise agreement, the franchisor controls the name, brand and business system you are going to use. The franchisor gives you the right to operate a business in line with its system, usually for a set period of time. It's important to understand that there will be some things you can and can’t do in a franchise compared to another type of business.

There are laws that must be followed when franchising in Australia, like the Franchise Code of Conduct (the Code) and the Australian Consumer Law. But these laws cannot ensure the success of the business or that your money is always protected. A franchise business can fail, just like any other business.

If you’re thinking about buying a franchise, our resources have information and guidance on what to consider and some steps to take before signing up as a franchisee.

The ACCC's role

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.

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.

More information

Franchising code of conduct

 

Note: The resources and information on this page are not a complete guide. You should also get your own independent legal, accounting and business advice before you buy a franchise.

 

Authorised by the Australian Government, Canberra.

Published date: 
13 June 2019

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