Buying into a franchise is one of the largest commitments a small-business owner can make. Initial franchise fees of $30,000–$300,000+. Ongoing royalties of 5–10% of gross revenue. Marketing levies on top. Mandatory supply arrangements. 5- or 10-year terms with restricted exit rights. Territory clauses that may protect you (or not). Renewal terms that often favour the franchisor.
The Franchising Code of Conduct (a mandatory code under the Competition and Consumer Act 2010) gives prospective franchisees specific rights — but the protection only works if you actually understand what you’re signing.
What the Code requires before you sign
- A Disclosure Document with prescribed information about the franchisor, the system, and the costs
- The current franchise agreement, in the form you’ll be signing
- A copy of the Code itself
- A 14-day cooling-off period from the date of signing
- A 7-day disclosure period — minimum time between receipt of disclosure and signing
You’re entitled to use that disclosure period to actually review what you’re signing. Most prospective franchisees don’t, partly because the documents are intimidatingly long and partly because the franchisor’s salespeople apply pressure to “lock in your territory before someone else does”.
The clauses that matter most
- Initial fee composition — what does the $80,000 actually buy? Training, fit-out support, equipment, exclusive territory, brand rights?
- Ongoing royalty calculation base — gross revenue, net revenue, after-tax? The base massively affects your effective royalty rate.
- Mandatory supply arrangements — must you buy from the franchisor or nominated suppliers? At what margin? Are competitive alternatives banned?
- Marketing levy mechanics — how is your levy spent? On national marketing or your local territory? What governance is there?
- Territory definition — exclusive, sole, or non-exclusive? Can the franchisor open another outlet near you? Can they sell directly online into your territory?
- Renewal terms — automatic? Subject to franchisor approval? Renewal fee? Updated agreement terms?
- Termination rights — what triggers franchisor termination? What’s the dispute process? What’s the buyback obligation?
- Sale and assignment rights — can you sell your franchise? At what cost? What approval is needed?
- Restraint of trade — what can you do after the agreement ends? For how long? In what geography?
- Personal guarantees — what personal liability are you accepting beyond the corporate franchisee entity?
Ready to put it in writing?
Answer 3 quick questions to check you have the details your document needs, and see your next step.
1. Who is this about?
2. How much is at stake?
3. Do you have it in writing?
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What Claim Done’s franchise review delivers
Upload the franchise agreement and disclosure document. In about 5 minutes you receive a plain-English A4 PDF report covering the clauses that matter, the implications, the dollar exposure where calculable, and recommended questions to raise with the franchisor before signing.
Flat $49 fee. Available 24/7. The report is yours to use however you want — as a negotiation checklist or as a discussion document with your accountant.
For a full legal review
Franchising is a specialist area. The report shortens that lawyer’s onboarding time substantially, which translates to lower fees and faster turnaround.
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What happens when you put it in writing — properly
Same problem. What a prepared case looks like.