Buying a franchise: what to check before you sign
A franchise gives you a proven brand and system, but you pay for it, and you run the business by someone else's rules. The Franchising Code of Conduct gives you time and information to decide. This guide explains the documents, the deadlines, the costs and the questions to ask before you sign.
In short
- The Franchising Code of Conduct is mandatory. A new version applies to agreements entered into, renewed, extended or transferred from 1 April 2025.
- Before you sign, the franchisor must give you an information statement, the disclosure document, the final agreement and a copy of the Code, then wait at least 14 days.
- After signing a new agreement, you usually have a 14-day cooling-off period to change your mind in writing.
- Talk to current and former franchisees, and check every cost - up-front fees, ongoing royalties, marketing funds and fit-out.
- Get independent legal and accounting advice before you sign. Franchisors must tell you to.
Is franchising right for you?
In a franchise, the franchisor owns the brand and business system. As the franchisee, you pay to use them for a set time, you carry the financial risk of your business, and you must run it the franchisor’s way.
| Franchising can suit you if | It may not if |
|---|---|
| You want a proven system and training | You want to make your own decisions on products, suppliers and marketing |
| You value a known brand and group marketing | You don’t want to pay ongoing fees from your sales |
| You’re happy following set procedures | You’d find strict rules and inspections frustrating |
| You want support from head office and other franchisees | You want to build something you can freely sell or change |
Remember that a franchise isn’t a guaranteed income. Results vary widely between franchise systems and between locations in the same system.
The Franchising Code of Conduct
The Franchising Code of Conduct is a mandatory industry code under the Competition and Consumer Act, enforced by the ACCC. It aims to address the power imbalance between franchisors and franchisees, increase access to information and provide a fair way to resolve disputes. A new Code started on 1 April 2025, with some rules applying from 1 November 2025, for agreements entered into, extended, renewed or transferred from 1 April 2025.
The documents you’ll receive
According to the ACCC, once you express interest the franchisor must give you:
- The information statement, within 7 days and before any other document. It summarises the risks and rewards of franchising.
- The franchise agreement in its final form (ready to sign).
- The disclosure document, in the form set out in the Code. It covers the franchisor’s background, the people running it, litigation, the franchise network (including franchisees who have left), costs, marketing funds, territory, supply arrangements and more.
- A copy of the Franchising Code.
Depending on the situation, you may also receive earnings information (historical or projected, with a statement about its accuracy, or a statement that none is provided), leasing information if you’ll lease premises from the franchisor, and copies of other agreements you must sign, such as guarantees or loan agreements.
All franchisors must also publish information on the government’s franchise disclosure register, which you can search before you start talking to them.
The 14-day disclosure period
After you receive the documents in their final form, there’s a mandatory 14-day waiting period before you can sign. Use it:
- read every document in full
- take them to a lawyer and an accountant who understand franchising
- speak to current and former franchisees
- check the location, lease and your finances.
Franchisors must tell you to get independent advice. Don’t let anyone rush you.
The 14-day cooling-off period
After you sign a new franchise agreement, you generally have 14 days to change your mind, in writing. The ACCC says the franchisor must return your money within 14 days, though it can keep amounts for reasonable expenses if the agreement sets out how they’re calculated. There’s also a cooling-off right after you receive certain leasing documents.
You can only opt out of the cooling-off period in narrow situations, for example if you have, or recently had, a substantially similar agreement with the same franchisor for substantially the same business. Be careful: opting out means giving up the right to walk away and get your money back.
Understand every cost
List all the costs, up front and ongoing:
| Cost | What to check |
|---|---|
| Initial franchise fee | What it covers; whether any part is refundable |
| Fit-out, equipment and vehicles | Who chooses the supplier; whether you must refurbish later |
| Lease and premises | Who holds the lease; rent, term and how it links to the franchise term |
| Training and set-up | Included or extra; travel costs |
| Royalties or ongoing fees | Percentage of sales or fixed; how calculated; when they increase |
| Marketing fund contributions | How much; how the fund is spent and reported |
| Required suppliers | Whether you must buy from the franchisor or its suppliers, and whether they profit |
| Technology fees | Point-of-sale, software and websites |
| Renewal, transfer and exit costs | What it costs to renew, sell or leave |
| Working capital | Money to live on and run the business until it’s profitable |
Prepare your own cash flow forecast, based on what current franchisees tell you, not just the franchisor’s figures. See Financial planning and cash flow and Funding a start-up.
Questions to ask franchisees
The disclosure document lists current and former franchisees. Call several, including some who left:
- How long did it take to break even? How do your earnings compare with what you expected?
- What are the real costs that surprised you?
- How good is the training and support?
- How does the franchisor handle problems and disagreements?
- Is the marketing fund spent well?
- Would you buy this franchise again?
- Why did you leave? (for former franchisees)
Questions to ask the franchisor
- How many franchises have opened, closed, been sold or been bought back in recent years, and why?
- What exactly is my territory, and can you open other outlets or sell online into it?
- What happens at the end of the term? Is renewal guaranteed, and on what terms?
- Can I sell my franchise, and what approvals and fees apply?
- What changes can you make to the system, and who pays?
- How are disputes handled?
Red flags
- Pressure to sign quickly, or to skip the waiting period or cooling-off period
- Earnings claims that aren’t in writing or aren’t supported
- Many recent closures or franchisees leaving, or reluctance to let you speak to them
- High up-front fees and little ongoing support
- Required purchases at prices well above the market
- Vague answers about territory, renewal or exit
- The franchisor’s own finances or litigation history raising concerns.
Unfair terms in standard form contracts with small businesses can be challenged under the Australian Consumer Law, but it’s much better to understand and negotiate before you sign. See Contracts and legal basics.
If things go wrong
The Code sets out a dispute resolution process, including mediation. The Australian Small Business and Family Enterprise Ombudsman can help with franchising disputes, and you can report concerns about a franchisor’s conduct to the ACCC.
Common questions
What documents must a franchisor give me before I sign?
An information statement within 7 days of you showing interest, the franchise agreement in final form, the disclosure document and a copy of the Franchising Code. You then have at least 14 days before you can sign.
Is there a cooling-off period when buying a franchise?
Yes. After signing a new franchise agreement you generally have 14 days to change your mind in writing. The franchisor must return your money within 14 days, though it can keep reasonable expenses set out in the agreement.
What costs should I expect when buying a franchise?
An initial franchise fee, fit-out and equipment, lease costs, training, ongoing royalties, marketing fund contributions, required supplier purchases, technology fees, renewal or exit costs, and working capital to live on until the business is profitable.
What questions should I ask current franchisees?
How long it took to break even, how earnings compare with expectations, which costs surprised them, how good the support is, how disputes are handled, whether the marketing fund is spent well, and whether they’d buy again.