Franchise agreement checklist: what to check before signing
Before you sign a franchise agreement in Australia, you must get the disclosure document and the agreement at least 14 days ahead. For a new agreement, a 14-day cooling-off period generally follows signing, unless you validly opt out under the limited rules below. After that, leaving is hard. So the real check happens now, and this franchise agreement checklist covers the clauses that cost franchisees most later.
Those clauses are rarely the franchise fee. They are the mandatory suppliers, the marketing fund, the refit schedule, the end-of-term rules, the restraint, the lease and the personal guarantee. The worked examples show how costs add up, followed by questions and terms to raise.
How to use the examples: the terms in the “What to ask for instead” columns and the clause rewrites are illustrative negotiation requests. The $50,000 guarantee cap, 12-month restraint and marketing contribution caps are not legal entitlements or universally suitable limits. Have your adviser adapt them to the business and the agreement. Legal requirements are identified separately.
What the law gives you before you sign
Franchising is governed by the Franchising Code of Conduct. It is a mandatory industry code under the Competition and Consumer Act 2010 (Cth). The current version is the Competition and Consumer (Industry Codes—Franchising) Regulations 2024. It has applied since 1 April 2025, and some rules started on 1 November 2025.
The Code sets a timetable the franchisor has to follow. The ACCC lists each document and its deadline:
| Document | When you must get it |
|---|---|
| Information statement | Within 7 days of showing interest, before any other document |
| Disclosure document | At least 14 days before you sign |
| The franchise agreement | At least 14 days before you sign |
| A copy of the Code | At least 14 days before you sign |
| The lease or occupancy terms, if any | At least 14 days before you sign |
Other agreements tied to the franchise also come with it. The ACCC names hire purchase, guarantee, loan, confidentiality and non-compete agreements. You get them when they become available, or 14 days before signing.
Before signing, the franchisor must also receive a statement about advice. Either an independent lawyer, business adviser and accountant sign that they advised you. Or you sign that you chose not to get advice. That signature is easy to give and hard to take back.
These obligations sit on the franchisor, and they carry penalties. Most carry a maximum civil penalty of 600 penalty units. At $364 a unit from 1 July 2026, that is $218,400 (600 × $364). A few carry higher maximums.
Check the register first. The franchise disclosure register is run by the government at franchisedisclosure.gov.au. The ACCC says a franchisor missing from it is unlikely to be a legitimate franchise system.
What cooling-off can and can't do
The 14-day cooling-off period is real, but it is narrower than most franchisees assume.
You can terminate a new agreement in writing within 14 days of entering it, unless you validly opt out. The franchisor must refund payments within 14 days of notification, less reasonable termination expenses specified in the agreement or calculated as it provides. See the ACCC's cooling-off guidance.
For premises leased or occupied from the franchisor or its associate, a separate 14-day termination window runs after:
receiving proposed lease or occupancy terms;
receiving final terms that are not substantially identical to the proposal; or
entering the lease or receiving the occupancy licence on terms not identical to those previously supplied.
These rights also depend on no valid opt-out. Ending the franchise does not itself end a separate lease.
| What the agreement says | What to ask for instead |
|---|---|
| A long list of "establishment costs" kept on cooling-off | An agreed dollar cap on expenses kept |
| Cooling-off ends without considering later lease documents | Written confirmation of each applicable deadline |
| A waiver of cooling-off | Advice on eligibility before signing any opt-out notice |
A written opt-out requires a current or recent agreement on substantially the same terms with the same franchisor for the same or substantially the same business. A first-time franchisee does not meet that test.
Plan for day 15. Spend nothing on fit-out, stock or staff that cooling-off would not get back.
Ongoing costs: the fee is the smallest number
The franchise fee is the figure everyone negotiates. Franchise fees that run every month are the figures that decide whether the business pays.
Mandatory suppliers
Most systems require you to buy stock, equipment or services from approved suppliers. That is usually lawful. The disclosure document must list all supply arrangements and any rebates or financial benefits the franchisor gets from them.
| What the agreement says | What to ask for instead |
|---|---|
| Buy only from suppliers the franchisor nominates, as varied from time to time | The current approved list, and notice before it changes |
| Prices set by the supplier | A price review against market, at least once a year |
| Silence on rebates | The rebate disclosed in dollars or percent, and where it goes |
Ask one question in writing: how much did the franchisor and its associates receive from approved suppliers last year?
Worked example 1: the five-year cost on $900,000 of sales
These are illustrative figures for a food outlet. Swap in the numbers from your own disclosure document.
| Cost | Basis | Per year |
|---|---|---|
| Royalty | 6% of $900,000 | $54,000 |
| Marketing fund | 2% of $900,000 | $18,000 |
| Technology fee | $350 a month × 12 | $4,200 |
| Supplier premium | 5% above market on $270,000 of stock | $13,500 |
| Total ongoing | $89,700 |
That is close to 10% of every dollar through the till, before rent, wages or stock. Over a 5-year term it is $448,500 ($89,700 × 5). Add a required refit in year 5 at $80,000, and the total is $528,500.
None of these numbers is unusual on its own. Added up, they are the business case. Build this table before you sign, not after.
The marketing fund
A marketing fund is a pool every franchisee pays into for advertising. The Code calls it a specific purpose fund. From 1 November 2025 the franchisor must:
use the money only for the fund's stated purpose
prepare a financial statement within 4 months of the end of the financial year
have it audited within 4 months, unless 75% of contributing franchisees vote not to
give you the statement, and any audit report, within 30 days
contribute for its own corporate outlets on the same basis as franchisees
| What the agreement says | What to ask for instead |
|---|---|
| Contribution set by the franchisor, as varied | A fixed percentage, with a cap on increases |
| Fund used "for marketing and related purposes" | A list of permitted uses, and none for the franchisor's own overheads |
| No mention of local area marketing | Local spend credited against the fund, or stated separately |
Ask for the last fund statement. The disclosure document must include a copy of it.
Refits and capital expenditure
Capital expenditure means a one-off spend, such as a refurbishment, relocation, rebrand or equipment upgrade. The ACCC gives those as likely examples of significant capital expenditure.
From 1 November 2025 the franchisor must discuss it with you before you sign. The disclosure document must cover why it is needed, the amount, timing and nature, the expected benefits and the risks. Where a figure isn't certain, it must say so and give a reasonable range.
The Code also now requires a reasonable opportunity to make a return on any investment the franchisor requires.
| What the agreement says | What to ask for instead |
|---|---|
| Refurbish "to the franchisor's current standard" when required | One refit, in a named year, with a dollar cap |
| Upgrades to technology as directed | A cost range in the disclosure document, and a minimum gap between upgrades |
| Refit on renewal, at your cost | Refit only if the renewed term is long enough to recover it |
The lease and the franchise term
This is the mismatch that catches people. The franchise agreement and the lease are two contracts, with two terms, two counterparties and two ways to end.
The franchisor must give you the lease at least 14 days before you sign. It must also disclose any incentive or financial benefit it gets from the lease.
Worked example 2: a $300,000 fit-out on a 5-year lease
Say the franchise term is 10 years and the fit-out costs $300,000. You plan to recover it evenly, at $30,000 a year. The lease is 5 years, with no option to renew.
At the end of year 5 the landlord declines to renew. $150,000 of fit-out is still unrecovered ($300,000 − 5 × $30,000). The franchise agreement still has 5 years to run. You now need new premises, a second fit-out and the franchisor's approval.
It can run the other way. A 10-year lease under a 5-year franchise term leaves you holding premises you can't trade from under the brand.
| What the agreement says | What to ask for instead |
|---|---|
| Franchise term and lease term set separately | Both ending on the same date, or options lining them up |
| Franchisor holds the head lease and sublets to you | A copy of the head lease, and its end date |
| No clause for losing the premises | A right to end without penalty if the lease is lost through no fault of yours |
The commercial lease guide covers the lease side: outgoings, make-good and option windows.
End of term
There is no automatic right to a further term. The ACCC says plainly that franchisees are not automatically entitled to one.
The franchisor must give written notice of whether it will extend the agreement or grant another agreement at least 6 months before the term ends. For an agreement with a term shorter than 6 months, the minimum is 1 month. Put the applicable date in your calendar and start your renewal planning before it.
| What the agreement says | What to ask for instead |
|---|---|
| Renewal "at the franchisor's discretion" | An option to renew, with the conditions written down |
| Renewal on the franchisor's then-current terms | Fees on renewal capped at today's levels plus an index |
| No goodwill paid at the end | A right to claim fair value for goodwill if renewal is refused |
If the franchisor ends the agreement early
For a new agreement signed now, check the required compensation clause for early termination because the franchisor leaves the Australian market, rationalises its Australian network or changes its Australian distribution model. These requirements began on 1 November 2025; see the Code's compensation provisions.
Ask how compensation will be calculated, including lost profit, unrecovered capital expenditure the franchisor required, the lost opportunity to sell established goodwill and winding-up costs. Have your adviser also check the related stock and equipment return, buyback or compensation provisions. This is a check for specified termination reasons, not a promise of compensation whenever the franchise ends.
The restraint
A restraint of trade is a clause that stops you running a similar business after the agreement ends. Most franchise agreements carry one.
The Code now limits it. A franchisor must not include a restraint that applies at the end of the term when all of these apply:
The agreement had an option to renew or extend
You gave written notice, asking for substantially the same terms others get
You met the renewal conditions
You were not in serious breach
You did not misuse the franchisor's IP or confidential information
The franchisor still refused to renew or extend
Your goodwill compensation was nominal or inadequate, or the agreement didn't allow a claim
| What the agreement says | What to ask for instead |
|---|---|
| 2 years, 25 km, any similar business | An illustrative narrower term: 12 months, a set radius, the same trade only; assess enforceability separately |
| Restraint applies however the agreement ends | No restraint if the franchisor declines a valid renewal |
| Restraint binds your family and associates | Limited to you and the franchisee entity |
Notice how the Code works. It protects the franchisee who did everything right and was still refused. It does not cover a franchisee who simply walks away.
The personal guarantee
Most franchisors ask the directors of the franchisee company to guarantee it personally. A personal guarantee makes your own house and savings available to the franchisor if the company can't pay.
| What the agreement says | What to ask for instead |
|---|---|
| All obligations, under this agreement and any renewal | A dollar cap, and the initial term only |
| Continues after you sell | Ends on an approved transfer of the franchise |
| Every director and their spouse | The directors actively running the business |
Check whether you are also guaranteeing the lease. Two guarantees, to two parties, can both survive the business.
Three clause rewrites worth asking for
Franchisors often say the franchise contract is non-negotiable. Sometimes it is. A refusal tells you something about the system. The alternatives below are discussion drafts, not Code-prescribed clauses. Their amounts, limits and wording need to be negotiated and checked for your circumstances.
The refit clause
What the franchisor sends:
The Franchisee must refurbish the Premises to the Franchisor's current standards whenever reasonably required by the Franchisor.
What to ask for:
The Franchisee must refurbish the Premises once during the Term, in year 5. The cost must not exceed the range set out in the Disclosure Document. Any other significant capital expenditure needs the Franchisee's written agreement, unless required by law or the Lease.
The marketing fund clause
What the franchisor sends:
The Franchisee must contribute to the Marketing Fund the amount the Franchisor determines from time to time.
What to ask for:
The Franchisee must initially contribute 2% of Gross Sales to the Marketing Fund. The contribution rate may increase by no more than 0.5 percentage points in total during any 12-month period. The Fund is held in a separate account and used only for national and regional advertising.
Here, 0.5 percentage points means a move from 2% to no more than 2.5% in that period, not a 0.5% relative increase. The 2% starting rate, increase limit and advertising-only spending restriction are illustrative commercial requests. The separate-account obligation comes from the Code. The Code does not set these contribution caps, and its permitted spending rules can allow reasonable fund administration and audit expenses. Agree how those costs will be handled before using this wording.
The personal guarantee
What the franchisor sends:
The Guarantor guarantees the due performance of all of the Franchisee's obligations under this Agreement and any renewal or extension of it.
What to ask for:
The Guarantor's total liability is limited to $50,000. This guarantee ends at the end of the initial Term, or on an approved transfer, whichever comes first.
Franchise agreement checklist
Work through this before you sign. Every line is a question you can put to the franchisor in writing.
Register. Is the franchisor on franchisedisclosure.gov.au?
Timing. Did you get every document at least 14 days before signing?
Cooling-off. What signing and lease-related deadlines apply, is any opt-out valid, and what expenses can be kept?
Total cost. Have you built the five-year table from worked example 1?
Suppliers. What rebates did the franchisor receive last year, in dollars?
Marketing fund. Do you have the last statement and audit report?
Capex. Are the refit years and cost ranges in the disclosure document?
Lease. Do the lease and the franchise term end on the same date?
Renewal. Is there an option to renew, on what conditions, and when is the end-of-term notice due?
Restraint. How long, how far, and does it apply if renewal is refused?
Guarantee. Is it capped, and does it end on transfer?
Early termination. Does the agreement explain compensation for the specified franchisor decisions above, and the related stock and equipment arrangements?
Advice. Have a lawyer and an accountant read the documents?
When to call a lawyer
Reading carefully gets you most of the way. A franchise agreement review by a lawyer earns its cost in these situations.
Before signing the advice statement. If you plan to sign that you chose not to get advice, stop there. That is the moment to get it.
A site you are leasing from the franchisor. Two documents from one counterparty need to be read together, clause by clause.
A dispute that has started. The Code sets a process: write to the other party, then follow the Code if nothing is agreed within 21 days. The Australian Small Business and Family Enterprise Ombudsman can help arrange mediation.
What this doesn't cover
Agreements entered into before 1 April 2025, which may still sit under the earlier Code. Buying an existing franchised outlet from another franchisee, which brings its own transfer rules. Master franchise and multi-unit deals. Motor vehicle dealership agreements, which carry extra Code rules. Tax, GST and finance for the purchase. And the unfair contract terms rules, which the ACCC says likely protect most franchisees. We have written separately on what an unfair contract term now costs.
Verified 3 October 2026, against the Franchising Code of Conduct pages on accc.gov.au and the register at franchisedisclosure.gov.au. Also against the 2024 Franchising Regulations and their explanatory statement on legislation.gov.au.
Updated 4 October 2026: cooling-off, lease-related termination, renewal notice and early-termination compensation checked against the linked ACCC guidance and Code. Negotiation examples clarified.
A franchise agreement is written once, by the franchisor, and signed by every franchisee in the system. Upload the draft before you sign it. Every clause is scored, the one-sided terms are named, and the ones worth raising come back rewritten.
Contractam provides contract analysis and information, not legal advice. For advice specific to your situation, consult a qualified Australian lawyer. Contractam analyses contracts under Australian law only. See our disclaimer.