You have decided to buy a franchise. The franchisor handed you a 90-page agreement, a 60-page disclosure document, and a deadline to sign. The branded name and the operations manual look great. But Australian franchise litigation is dominated by one fact: most failed franchisees say they did not understand what they had signed. The Franchising Code of Conduct exists to protect you — use it before you sign, not after.
The cooling-off period
Under the Franchising Code of Conduct (a mandatory industry code under the Competition and Consumer Act 2010), you have 14 days from signing the agreement (or paying any non-refundable money, whichever is earlier) to terminate and recover everything except reasonable costs. Use this period — do not sign if you have not finished due diligence.
The disclosure document
The franchisor must give you a Disclosure Document at least 14 days before you sign or pay anything. The document must contain franchisee numbers, financial information, supplier rebates, marketing fund details, litigation history, prior franchisee contacts, and more. Read every page. Call at least five existing and former franchisees from the contact list — their candid feedback is the single most valuable due diligence input.
Earnings claims
Franchisors are tightly regulated on earnings claims. Verbal assurances about turnover or profit have repeatedly led to misleading and deceptive conduct findings under the Australian Consumer Law (section 18, Schedule 2 Competition and Consumer Act 2010). If a claim about earnings was made, get it in writing and stress-test the assumptions.
Territory rights
Most franchise agreements grant a territory but reserve the franchisor’s right to open competing units, sell online, supply major customers directly, and grant other licences in the area. “Exclusive territory” is rarely truly exclusive. Read the carve-outs carefully.
Renewal, transfer and exit
The end of the franchise term is the painful part. Many agreements grant no automatic renewal, give the franchisor wide discretion over transfer to a buyer, and impose post-term restraints preventing you from running a similar business. Make sure the renewal mechanics, transfer mechanics, and post-term restraints are workable before you sign.
Marketing fund contributions
Most franchisees pay 2 to 5 per cent of revenue into a marketing fund. The franchisor must account for this fund annually and spend it for the benefit of franchisees. Marketing fund mismanagement is a recurring source of franchisee disputes — make sure the agreement requires audited annual reports.
Personal guarantees
Almost every franchise agreement requires the directors of the franchisee company to give personal guarantees of all obligations under the agreement. This punctures any corporate liability protection. Negotiate caps where possible; if not, understand exactly what you are putting on the line.
Supplier and rebate arrangements
Many franchisors require you to buy supplies only from approved suppliers — and receive rebates from those suppliers themselves. The Disclosure Document must record these rebates. They are not necessarily wrong, but they affect your gross margin.
Dispute resolution
The Code requires franchise disputes to go through a defined mediation process via the Australian Small Business and Family Enterprise Ombudsman before litigation. The agreement may add further steps. Make sure the dispute resolution mechanics are not a delay tactic.
What Claim Done delivers
For a flat $79, Claim Done’s Contract Review parses your franchise agreement against the Franchising Code, the Australian Consumer Law and common-law principles, and returns a PDF — flagged clauses, exposure analysis, and the questions to take back to the franchisor before signing. Ten minutes versus the $1,200 to $3,500 a franchise lawyer would charge for the same review.
What happens after
Armed with the review, you go back to the franchisor with informed questions and amendment requests. Strong franchisors will negotiate; weak ones will refuse — and that itself is a useful signal. Either way, you sign (or walk) with eyes wide open, not on hope.