Buying a Franchise in Australia: Check Litigation History

A legal dispute does not automatically make a franchise a poor investment. However, repeated claims about the same business practice deserve attention before you commit your savings. Checking litigation history helps you look beyond a brand’s reputation and understand how its relationships work under pressure. The aim is not to find a dispute-free franchise community, but to identify unresolved risks and assess whether the franchisor has addressed them.

Understand what disclosure can tell you

Australia’s Franchising Code of Conduct is a mandatory code regulating the franchising community. A new Code commenced on 1 April 2025, with some additional requirements applying from 1 November 2025. The Australian Consumer Law also applies, including its prohibition on misleading or deceptive conduct.

Franchisors must provide a disclosure document containing specified information about the franchise. This includes certain legal proceedings involving the franchisor and other specified parties. The requirements cover defined categories, rather than every disagreement, complaint or court case connected with the brand.

Ask a solicitor experienced in Australian franchising to explain the litigation disclosures and which entities and individuals they cover. Do not interpret an empty litigation section as proof that nobody has ever raised a concern.

The franchise agreement, disclosure document and a copy of the Code must generally be provided at least 14 days before you sign. Use that review period to investigate significant entries, not simply to acknowledge receipt. If a legal issue remains unclear, seek an explanation before committing rather than treating the minimum review period as a deadline to buy.

Search beyond the brand name

Begin with the legal names in the disclosure document and franchise agreement. A customer-facing brand may differ from the company granting your franchise, and earlier proceedings may appear under a former company name.

Build a search list with your solicitor that includes:

• The franchisor’s full legal name and Australian Company Number.
• Relevant former names and related companies identified in the documents.
• Directors or other people whose involvement warrants investigation.
• The trading name, including common variations.

ASIC records can help establish company names and connections. Published court judgments and ACCC enforcement announcements can provide additional information. The Australian Government’s Franchise Disclosure Register is another starting point for franchisor information, but it is not a substitute for legal searches or advice.

Public searches have limits. Not every proceeding produces a published judgment, and private settlements may reveal little about the underlying disagreement. A lack of search results is therefore not a clean bill of health.

Keep a simple record of each relevant result: the parties, date, court or regulator, subject matter and known outcome. This prevents an old allegation from being confused with a recent finding.

Distinguish allegations from established findings

Read the outcome, not just the headline. A claim records what someone alleges; it does not establish that the allegation is true. Equally, a settlement does not necessarily show that the complaint was unfounded. An appeal may also affect the significance or finality of a decision.

For each material matter, ask:

• Was it a filed claim, interim decision, final judgment or settlement?
• What did the court actually decide?
• Is the matter ongoing, or has an appeal been lodged?
• Does it concern the same franchise model you are considering?
• Could the underlying practice affect your proposed agreement?

Look for patterns rather than simply counting cases. Several unrelated commercial disputes over a long history may mean something different from repeated findings about misleading recruitment statements.

Consider timing and management changes too. An older case may remain relevant if the same contractual wording or sales process is still used. Conversely, documented changes may show that a problem has been addressed. Ask your solicitor to separate legal significance from reputational noise.

Turn concerns into a buying decision

Send the franchisor focused written questions about material matters. Ask what happened, what changed and whether the changes apply to your proposed franchise. Avoid demanding confidential settlement details that the franchisor may not be free to disclose.

Useful evidence might include revised recruitment materials, updated agreement clauses or a documented change in compliance procedures. A general assurance that a dispute was “just a difficult franchisee” does not explain whether the underlying risk remains.

Give your solicitor the responses alongside the original records. Where a concern could affect costs or trading, ask your accountant to assess its financial implications. Decide which questions require satisfactory answers before you proceed, and pause if material inconsistencies remain unresolved.

Practical takeaway: Investigate significant litigation, distinguish allegations from findings and ask for evidence of corrective action. Buy only when you understand what the history means for the agreement you will actually sign.