Buying a franchise is one of the most common ways Australians enter small business ownership, and for many it offers a proven system, brand recognition and ongoing support that reduces the risks of starting from scratch. However, a franchise agreement is a long term legal and financial commitment, and the terms you sign up to will shape your business for years to come. Before putting pen to paper, prospective franchisees need to understand their rights under the law, the documents they are entitled to receive, and the practical steps that can protect their investment.

This article outlines what the law requires franchisors to disclose, what to look for in the agreement itself, and where to seek help if something goes wrong.

The Franchising Code of Conduct

Franchising in Australia is regulated at a federal level by the Franchising Code of Conduct, a mandatory industry code made under the Competition and Consumer Act 2010 (Cth). The Code applies to all franchise systems operating in Australia, including in New South Wales, and is administered by the Australian Competition and Consumer Commission (ACCC).

A new version of the Code, the Competition and Consumer (Industry Codes–Franchising) Regulations 2024, took effect on 1 April 2025 and replaced the previous 2014 regulation. Some obligations under the new Code were phased in, with further changes commencing on 1 November 2025. Depending on when your franchise agreement is entered into, extended, renewed or transferred, either the old or new Code may apply, so it is worth confirming which version applies to your circumstances before you sign anything.

The Code sets minimum standards for how franchisors and franchisees must deal with each other, including obligations to act in good faith, rules about disclosure, cooling off rights, and processes for resolving disputes without going to court.

The Disclosure Document

Before you sign a franchise agreement, the franchisor is legally required to give you a disclosure document. This is one of the most important protections available to franchisees, and it should be read carefully alongside the agreement itself.

The disclosure document must include information such as:

• The franchisor’s business history and the length of time the franchise system has operated in Australia.
• Details of the franchisor’s directors and any relevant litigation or insolvency history.
• The franchise fees payable, including ongoing fees and any contributions to a marketing or specific purpose fund.
• Information about existing and former franchisees, including contact details for former franchisees where available.
• Details of any lease or premises arrangements, where the franchisee will occupy premises connected to the franchise.
• Information about significant capital expenditure the franchisee may be required to undertake.
• A statement about earnings information, or a statement that no earnings information is being provided.

A franchisor must give this document to a prospective franchisee at least 14 days before the franchise agreement is signed. The Code also allows a franchisee, in limited circumstances, to request an updated disclosure document once every 12 months, which the franchisor must provide within two months of the request.

The 14 Day Cooling Off Period

Once you have received the disclosure document, the franchise agreement and the Franchising Code of Conduct, there is a mandatory cooling off period of 14 days. This period runs from whichever is the later of signing the agreement or making an initial payment to the franchisor. During this time, a franchisee can withdraw from the agreement, and the franchisor must refund any payments made, less any reasonable expenses already incurred by the franchisor.

This cooling off period cannot be waived by agreement in most circumstances, and franchisors are not permitted to make misleading statements about when the period ends or how it applies.

Common Issues to Look Out For in the Agreement

Beyond the disclosure obligations, there are several practical matters every prospective franchisee should scrutinise in the agreement itself.

1. Term and renewal rights. Check how long the initial term runs, whether there is an option to renew, and what happens if the franchisor decides not to renew.
2. Termination grounds. Understand the circumstances in which the franchisor can terminate the agreement, including the notice periods that apply.
3. Restraint of trade clauses. These restrict what you can do after the franchise ends, including whether you can operate a similar business in the same area. The Code places some limits on restraints that apply after a franchise agreement expires without renewal, so these clauses need careful review.
4. Fees and specific purpose funds. Clarify what ongoing fees apply, how marketing or other specific purpose funds are administered, and what reporting you are entitled to receive on how those funds are spent.
5. Premises and lease arrangements. If the franchise involves a retail premises in New South Wales, the Retail Leases Act 1994 (NSW) may also apply and interact with your obligations under the franchise agreement. It is important to have both documents reviewed together.
6. Return on investment. Under the current Code, franchisors must give franchisees a reasonable opportunity to make a return on their investment, and must discuss with prospective franchisees the capital expenditure that will be required.

Getting Independent Advice

The Franchising Code of Conduct expects franchisors to advise prospective franchisees to obtain independent legal, business and accounting advice before signing. A lawyer can review the disclosure document and agreement against the Code’s requirements, identify unusual or unfavourable terms, and advise on how the agreement interacts with other obligations, such as a commercial lease or personal guarantee.

Resolving Disputes

If a dispute arises after you have entered into a franchise agreement, the Code requires parties to attempt resolution through internal complaint processes and, if that fails, through mediation before litigation is considered. In New South Wales, small business disputes, including some franchising matters, may also be able to be brought before the NSW Civil and Administrative Tribunal (NCAT), depending on the nature of the claim. The ACCC does not resolve individual franchising disputes but can investigate suspected breaches of the Code and has power to issue infringement notices for non-compliance.

How Joseph Grassi + Associates Can Help

Entering into a franchise agreement is a significant decision, and getting the right advice before you sign can prevent costly problems later. Joseph Grassi + Associates regularly assists prospective franchisees in Penrith and across NSW to review disclosure documents and franchise agreements. If you are considering a franchise opportunity, contact us on (02) 4702 5905, email info@grassiassociates.com.au, or visit grassiassociates.com.au to arrange a consultation.

This article is intended as general information only and does not constitute legal advice. For advice specific to your circumstances, please contact Joseph Grassi + Associates.