Buying a Franchise in Australia: Check the Premises Lease

A suitable location can still be a poor franchise purchase if the lease creates obligations you cannot control. Before joining Australia’s franchising community, check that your right to occupy the premises supports your right to operate the business. Treat the lease and franchise agreement as connected commitments, not separate paperwork exercises.

1. Establish who controls the premises

Start by identifying the legal arrangement. You might lease directly from a landlord, sublease from the franchisor, or occupy under a licence. These arrangements can give you different rights, costs and exposure if another party defaults.

Ask for the proposed lease, any head lease, sublease or occupancy licence, and documents recording variations. Have an independent solicitor identify:

• Who is legally entitled to occupy the premises.
• Who pays rent, outgoings, insurance and repairs.
• Whether landlord consent is needed for your occupation or fit-out.
• What happens if the franchisor’s head lease ends.
• Whether you receive notices of default and have any opportunity to respond.

Do not assume paying rent to the franchisor gives you the same protection as holding a direct lease. Equally, a direct lease can leave you liable for rent after your franchise rights have ended.

Ask your solicitor to explain the consequences if the franchisor becomes insolvent or loses control of the premises. Brand approval of a site is not a guarantee of secure occupation.

2. Match the dates and renewal conditions

Prepare a one-page timeline showing the commencement and expiry dates of the franchise agreement, lease and any head lease. Include rent commencement, fit-out access, opening deadlines and every renewal notice deadline.

A mismatch can be expensive. If your franchise agreement ends before the lease, you could remain responsible for premises you can no longer use under the brand. If the lease ends first, you may lose the location while still having franchise obligations.

Check options carefully. A lease renewal option does not automatically renew your franchise agreement. A franchise renewal does not compel the landlord to extend your lease. Options may also depend on giving notice correctly and satisfying conditions.

Ask what happens if planning approval, building works or landlord consent delays opening. Negotiate suitable conditions before committing, rather than relying on an assurance that dates can be adjusted later.

Where possible, have your solicitor coordinate the agreements so that a failed approval or unavailable premises does not leave you committed to the other transaction.

3. Price the full occupancy commitment

The advertised rent is only the starting point. Ask your accountant to build an occupancy budget from the actual documents, separating regular payments from contingent costs.

Include:

• Base rent, review mechanisms and any turnover rent.
• Recoverable outgoings and how they are reconciled.
• Security deposits, bank guarantees and associated charges.
• Fit-out works, approvals, maintenance and equipment servicing.
• Refurbishment obligations imposed by either landlord or franchisor.
• End-of-lease removal and reinstatement costs, often called make-good.

Check how rent-free periods and fit-out contributions work. An incentive may have repayment conditions if you leave early or default. Obtain written detail rather than deducting the headline incentive from your costs automatically.

Pay particular attention to personal guarantees. Ask who gives them, which obligations they cover and when they end. Selling the business or leaving the premises does not necessarily release a guarantor.

Have your accountant test a delayed opening and the rent increases permitted by the lease. The question is whether you can fund the premises obligations when trade is weaker than expected.

4. Check legal protections and your exit route

Australia’s franchising community is specifically regulated by the mandatory Franchising Code of Conduct under the Competition and Consumer Act 2010. A replacement Code commenced on 1 April 2025, with further requirements applying from 1 November 2025. Your solicitor should confirm which provisions apply to your transaction.

The Code requires additional disclosure where a lease or other occupancy arrangement is connected with the franchise. However, franchise disclosure does not replace a legal review of the premises documents. Nor should you assume that exercising franchise cooling-off rights will cancel a separately signed lease.

State and territory retail leasing laws may also apply. Their coverage and protections differ, so ask whether your particular premises and agreement qualify. The Australian Consumer Law also prohibits misleading or deceptive conduct, and its unfair contract terms protections may apply to qualifying standard-form small business contracts. Not every unfavourable term is legally unfair.

Finally, map the exit process. Can you transfer the lease and franchise together? Whose consent is required, what costs arise, and will your guarantees be released? Check what happens if one party approves a buyer but another refuses.

Practical takeaway: Before signing, obtain a written review covering control of the premises, aligned dates, total occupancy costs and a workable exit. Resolve gaps in the contracts—not through verbal promises.