Franchise in Australia: Key Considerations for Franchisors
Posted on February 17, 2026
Franchising in Australia is a well-established business model, offering significant opportunities for growth and brand expansion. However, it is also a heavily regulated area of law, and for franchisors, compliance failures can lead to serious financial and reputational consequences. As a lawyer advising franchisors, I often see businesses underestimate the legal obligations that arise once they choose to expand through franchising. This article highlights the key issues, risks, and compliance requirements that franchisors must navigate.
1. The Franchising Code of Conduct
The cornerstone of franchising regulation in Australia is the Franchising Code of Conduct (Code), which operates as a mandatory industry code under the Competition and Consumer Act 2010 (Cth). The Code applies to agreements that meet the definition of a franchise agreement and sets out the legal obligations of both franchisors and franchisees.
Key obligations for franchisors include:
- Public profile: Maintaining an up-to-date public profile on the franchise disclosure register.
- Disclosure: Franchisors must provide a compliant disclosure document to prospective franchisees at least 14 days before a franchise agreement is signed. This document must include material information about the franchisor, the franchise network and key terms of the franchise agreement such as fees payable, capital expenditure and termination clauses.
- Franchise Agreement: The Code prohibits certain clauses from being included in a franchise agreement as well as codifying clauses that must be included in a franchise agreement.
- Good faith dealings: The Code imposes an overarching requirement to act in good faith in all dealings with franchisees. Franchisees must also act in good faith in their dealings with the franchisor.
- Dispute resolution: Franchisors must comply with the dispute resolution procedure set out in the Code which can lead to mediation often through the Australian Small Business and Family Enterprise Ombudsman.
Failure to comply with the Code can result in significant civil penalties, enforcement action by the ACCC, and even the unwinding of franchise agreements.
2. Contractual Considerations
The franchise agreement is the legal backbone of the franchisor-franchisee relationship. While standardisation is important for brand consistency, franchisors must carefully draft agreements to balance operational control with legal enforceability.
Key contractual areas include:
- Intellectual property rights: Clearly define ownership of trademarks, branding, and proprietary systems to prevent misuse or disputes.
- Territorial rights and exclusivity: Determine whether franchisees have exclusive territories and under what conditions territories can be modified.
- Fees and payments: Detail initial franchise fees, ongoing royalties, marketing levies and significant capital expenditure requirements.
- Termination and exit clauses: Establish clear grounds for termination and exit processes, while ensuring compliance with the Code and general contract law principles.
3. Competition and Consumer Law Risks
Franchisors must also consider Australian Consumer Law obligations. Misleading representations, unconscionable conduct, or unfair contract terms can expose franchisors to significant legal risk. For example:
- Overstating potential earnings without reasonable grounds in marketing materials may risk a misleading conduct claim.
- Unreasonably restricting franchisees' rights under the agreement may be challenged as unfair contract terms which could be unenforceable and can attract significant penalties.
Regular reviews of marketing methods, representations made by personnel and terms of franchise agreements are essential to minimise exposure.
4. Operational Compliance
Franchisors should maintain systems for:
- Monitoring franchisee compliance with brand standards.
- Ensuring adequate training and support is provided to new franchisees.
- Keeping accurate records to demonstrate compliance with the Code, particularly in the event of disputes or regulatory audits.
- Taking reasonable steps to ensure franchisees are complying with workplace laws. This is essential because franchisor's can be held liable in some circumstances if franchisees underpay their staff.
Conclusion
For franchisors, legal compliance in Australia is not optional. It is central to sustainable growth. From disclosure obligations under the Code to contractual safeguards, intellectual property protection, and ongoing operational oversight, careful attention to legal requirements protects both the franchisor's brand and the long-term viability of the franchise system.
