This is an English version of Buying and running a franchise in other languages.

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Before you buy a franchise

There are things you should know and consider before buying a franchise.

Becoming a franchisee means having to follow most of the franchisor’s rules for how the business must be run. You may not always agree that those rules are best for the business.

You also take on the financial risk of the business. This could mean having no income if the business is unprofitable, or being unable to cover the costs of running the business.

It’s important you find out as much as you can about the franchise you are thinking of buying. Ask the franchisor questions, speak to other franchise owners, and get your own financial and legal advice.

Learn more about what to do before you sign a franchise agreement.

Key steps in buying a franchise

There are important steps you should follow to know the risks before signing a franchise agreement or paying money. This includes:

  • reading documents from the franchisor
  • asking the franchisor questions
  • talking to other franchisees and ex-franchisees
  • seeking professional legal, accounting and business advice from franchising experts.

Buying a franchise: key steps video

Buying a franchise.

It's been your dream, and you can't wait to get started, but are you ready to sign?

Buying a franchise business is a big decision.

It could be as big as buying a house.

It's wise to be informed, as your life savings could be at risk.

Know what the risks are to avoid heartache.

Before you decide to buy a franchise, you will get some important documents from the franchisor.

One of these is a disclosure document.

This will include important things you need to know about the franchise.

Another important document is the franchise agreement.

This is a legally binding contract between you and the franchisor.

It's important because it says what you can and can't do when running the franchise.

So you have a lot to read, but it is important to go through and understand the documents.

If you don't understand something, you can ask the franchisor.

Next, talk to the professionals.

An independent lawyer, accountant, and business advisor can give you advice about the franchise.

Make sure they have franchising experience.

You should also talk to other franchisees who've bought into the same franchise, both current and former franchisees.

Contact details for other franchisees must be in your disclosure document.

Get in touch and ask them whatever you need to.

You should ask current franchise owners what's the work like? Any unexpected costs? Recommend it?

When talking to former franchisees, ask was it a good investment?

It's also a good idea to ask why did you stop being a franchisee?

It is your investment.

Before you sign, research and get professional advice to understand what's right for you.

For more information, visit the website.

Supplier restrictions

Some franchisors require their franchisees to buy certain products from them or their specified supplier. These are known as supply restrictions. You may have no choice about where to buy some products.

Buying a franchise: supplier restrictions video

Sometimes when you buy a franchise it’s not up to you where you buy your supplies.

Imagine you’ve just bought a café. You want to make the best coffee in town at the best price. You can buy your milk from anywhere, but you can only buy your coffee beans from one supplier, and they are expensive. You can get coffee much cheaper from other suppliers, but your franchise agreement won’t let you. This is a supply restriction.

Supply restrictions are listed in your disclosure document and your franchise agreement. In many cases supply restrictions are legal. If they are legal and in your franchise agreement, you will have to follow them, even if it costs you more money.

Not sure about the supply restrictions? Get independent advice from a lawyer, accountant, and business adviser about the franchise. Make sure they have franchising experience.

For more information see the website.

Authorised by the Australian Government, Canberra.

Price and running costs

The up-front 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.

Buying a franchise: price vs costs video

Great, you've been working hard and you finally have enough money to buy a franchise.

But have you thought about the total cost?

There's the price of the franchise, the franchise fee, and then there are the costs of operating and maintaining the business.

Buying a franchise can be like buying a car.

You pay an upfront price to own the car, but you also pay the ongoing costs of running it.

If you go into franchising without understanding costs, you could be in for a shock.

Costs must be in your disclosure document.

If you don't pay the costs, you could breach your franchise agreement.

Get some independent advice from an accountant and business advisor, and make sure they have franchising experience.

Know the costs, not just the upfront price.

For more information, visit the website.

Do our free franchising course

Our free course, ‘Is franchising for me?’, helps you understand how franchising works, the risks, and legal obligations. It is in English and takes less than 90 minutes to complete.

What you'll learn

  • How franchising compares to independent small business ownership or employment.
  • What you are likely to find in a typical franchise agreement.
  • How to take reasonable steps to make good decisions about the franchise you want to buy. This is also known as due diligence.
  • Some of the common issues you can face.
  • Where to get more information and guidance to help you decide if you want to buy a franchise.
  • The main laws that apply to franchising.

Franchise agreement

A franchise agreement is the most important document in a franchising relationship. 

All franchise agreements should include:

  • the fees the franchisee pays
  • the beginning and end date of the agreement
  • franchisee rights and restrictions when using the franchisor’s branding and other intellectual property
  • any equipment and supplies the franchisee must buy
  • if the franchisee must participate in promotions and local area marketing
  • a reasonable opportunity to make a return on investment, during the agreement, on any investment required by the franchisor
  • the rules for selling the franchised business
  • the process the franchisee and franchisor must use to settle disputes
  • when and how the agreement can be terminated, including terms for the franchisor to pay fair compensation for early terminations
  • any rules the franchisee must follow when the agreement ends.

What shouldn't be in an agreement

Franchise agreements often favour the franchisor because they have written the agreement.

Under the franchising code, franchise agreements shouldn’t include:

  • unreasonable terms that stop you from working elsewhere once the agreement ends
  • terms requiring you to pay for franchisor’s costs when settling a dispute
  • terms that let the franchisors make changes to franchise agreements that apply retrospectively - without written consent from you
  • general releases of liability for a franchisor even if they did something wrong
  • waivers of any statements the franchisor makes to you, either verbally or in writing
  • restraint of trade clauses that would apply if the agreement ends, if certain conditions are met.

Before you sign an agreement

You can negotiate changes to a franchise agreement before you enter into it, but the franchisor doesn't have to agree.

You should get legal advice before signing to understand what changes a franchisor can make.

After an agreement has been signed

After an agreement has been signed, the franchisor usually can’t change a franchise agreement unless you agree.

Cooling-off period

You can terminate a new franchise agreement within 14 days of entering into the agreement (the cooling-off period). You must do this in writing and can get some or all of your money back.

In some cases you can choose not to have the cooling-off period by giving written notice to the franchisor. This is known as opting out of the cooling-off period.

Unfair contract terms laws

Most franchisees in Australia are protected by the unfair contract terms laws. These make it illegal for businesses to offer or enter into a contract that has unfair contract terms.

Significant penalties can apply.

Reasonable opportunity to make a return on investment

All franchise agreements entered into, renewed or extended on or after 1 November 2025 must give franchisees a reasonable opportunity to make a return on any investment required by the franchisor, during the term of the agreement.

A return on investment (ROI) refers to the franchisee’s ability to recover the up-front investment required by the franchisor and still make an ongoing profit from the business.

A reasonable opportunity doesn’t mean that the franchisor guarantees the profitability or the success of a business. It also doesn’t remove the inherent risks of running a business.

Learn more about the franchise agreement (in English).

Information and documents franchisors must give

Franchisors must give potential and current franchisees certain information and documents.

Before entering a franchise agreement

All franchisors must be on the . If you’re looking to buy a franchise, you can search the register and view franchisor profiles and business information.

Franchisors must give you:

  • the information statement, before any other document and within 7 days after you express interest in the franchise
  • the franchise agreement, this includes any existing franchise agreement being transferred to a new franchisee
  • the franchise disclosure document
  • a copy of the Franchising Code of Conduct.

Franchisors may also have to give you:

  • earnings information
  • leasing information
  • copies of other agreements.

During a franchise agreement

A franchisor must give a franchisee a current disclosure document within 2 months after receiving a written request from the franchisee.

When a franchisee pays into a specific purpose fund, such as a marketing fund, franchisors must disclose specific information and give certain documents to them.

The franchisor must give the franchisee copies of leases and other agreements in certain circumstances.

Materially relevant facts

Franchisors must tell prospective and current franchisees about materially relevant facts such as:

  • changes of owner, person or entity who controls the franchisor or franchise system
  • legal proceedings and judgments involving the franchisor or its directors and associates
  • insolvency events
  • changes to intellectual property important to the franchise.

Some materially relevant facts including financial details are in the disclosure document.

Learn more about information and document obligations (in English).

Ending a franchise agreement

Franchisees can lose a lot of money if the franchise agreement ends before they expect it to. Franchisees may:

  • owe money on loans they’ve taken out
  • have to pay rent on a lease
  • pay money to suppliers even though they can no longer operate the business.

A franchisee can change their mind and end the agreement within:

  • the cooling-off period
  • 14 days after receiving leasing information if they are leasing or occupying premises from the franchisor or their associate.

These are other ways for a franchise agreement to end:

  • The agreement is not renewed at the end of the term. This will depend on what’s in the agreement.
  • It may be ended by the franchisor early.
  • The franchisee can ask for it be ended. There is usually very limited ability for the franchisee to end the agreement early.

Learn more about ending a franchise agreement (in English).

Resolving a franchising dispute

If there is a dispute, there are 2 steps to follow:

  • Tell the other party in writing.
  • Follow the process in the code or franchise agreement.

There are ways to try and resolve a dispute such as mediation, conciliation and arbitration.

There are rules for resolving disputes about:

  • both parties acting in good faith
  • paying for dispute resolution
  • passing on costs
  • legal advice
  • location of the dispute resolution.

Where to get help

There are state ombudsmen and small business commissioners who can help when there is a dispute.

Ombudsman

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) is an independent advocate for small business owners and franchisees. The ombudsman can help you access alternative dispute resolution services. 

Visit the (ASBFEO) website. You can or call their information line on 1300 650 460.

State Small Business Commissioners

State Small Business Commissioners support small businesses with information, guidance and access to dispute resolution services:

  • .

Learn more about resolving franchising disputes (in English).

Authorised by the Australian Government, Canberra.

See also

See more detail about all of these topics on our franchising page (in English).

Read franchisee case studies(in English) about the experiences of others in franchising.

See more information about unfair contract terms (in English).