A few simple checks before you commit to a franchise can help you make an informed choice about whether franchising is right for you. Find out what you need to know before you sign an agreement. We also detail what to consider at key points in your franchising journey and where to find further information.
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Before you sign
Signing up to buy a franchise is a big decision. Take the time and research all the key details. Make sure you understand what you’re getting into before you sign an agreement or make a payment.
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Do your research first
Take our free online course ‘Is franchising for me?’. It can help you decide if franchising is the right business model for you to invest in.
Check the franchise disclosure document provided by the franchisor to learn about a particular franchise system before you decide to buy into it.
Talk to current and former franchisees to understand what owning or exiting a franchise is really like.
Before you sign a franchise agreement and buy the franchise →
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Read important documents early
Franchisors must give you certain documents. This includes the information statement (within 7 days of expressing any interest), then the franchise agreement, disclosure document and a copy of the franchising code at least 14 days before you sign.
Carefully read the information in these documents.
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Get independent advice
Always get independent legal, accounting and business advice before you sign any documents or pay any money. You’ll need to sign a statement saying whether you got independent advice or not before you sign the franchise agreement.
Before you sign a franchise agreement and buy the franchise →
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Know your cooling-off rights
There is generally a 14-day cooling-off period after you sign a new franchise agreement. This means you can get out of the agreement and get most of your money back.
Cooling-off can also apply when an agreement is transferred to a new franchisee.
Running a franchise
Once you are running your own franchise, it’s important to stay across changes in the franchise system. Changes may affect your costs or how you operate.
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Ask for current information
You can ask for an up-to-date disclosure document from your franchisor once every 12 months.
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Know what happens with the money you pay
You may pay money into a marketing fund or other funds related to running your franchise. These are called specific purpose funds. There are rules about how this money can be used. The franchisor must also give you a report every 12 months about how the money has been used.
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Raise issues early
Under the code, franchisors and franchisees must act in good faith. This doesn’t mean you will always agree with everything the franchisor does. If you have a disagreement or dispute with the franchisor, put it in writing and say what the issue is, what outcome you want and what would settle it. If you can’t resolve the issue directly with the franchisor, you can get outside advice and help.
Exiting a franchise
If you want to leave a franchise, plan ahead. Knowing your rights and options makes renewal, sale and exit easier to manage. The franchisor may also end your agreement early or decide not to renew it. Understanding your rights in these situations can help you respond.
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Know how an agreement can end early
You can write to the franchisor at any time to ask that the franchise agreement end. The franchisor does not have to agree to end the agreement, but they must give you their reasons why. The franchisor usually has many ways to end your agreement, including if they believe you have breached the agreement.
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Know your agreement dates and what happens after it ends
Renewal is not automatic. The franchisor must tell you if they will extend or offer a new franchise agreement at least 6 months before the end of the term, or 1 month before if the term is less than 6 months. They don’t have to renew your agreement. You won’t get paid any money when your agreement ends, even if the franchised business is sold to a new franchisee. Franchise agreements also often restrict what you can do afterwards, such as working in or owning a similar business for some time.
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If you want to sell, ask in writing
If you want to transfer your agreement, you must ask the franchisor in writing. They cannot unreasonably refuse consent and must consider your request. The code and most franchise agreements have details about how you can sell or transfer. Sometimes you have to offer to sell your franchise back to the franchisor first.