Buying a Franchise in Australia: Check the Premises Lease

Buying a premises-based franchise involves more than securing permission to use a brand. You also need a reliable legal right to occupy the location where you will trade. Within Australia’s franchising community, that right may come through a direct lease, a sublease or a licence from the franchisor. Before committing, check how your premises arrangements work alongside the franchise agreement.

Establish who controls the premises

Start with a simple question: who will hold the lease? You might lease directly from the landlord, or the franchisor might hold the head lease and give you a separate right to occupy. When buying an existing outlet, you may need an assignment of the seller’s lease rather than a new lease.

These structures create different dependencies. A direct lease establishes a relationship between you and the landlord. A sublease or occupancy licence may make your ability to remain at the site dependent on the franchisor’s own rights and compliance with its head lease.

Ask for the documents that establish the complete chain of occupancy rights, including:

• The proposed lease, sublease or occupancy licence.
• The head lease, where your occupancy depends on it.
• Any variations, side agreements or landlord consents affecting your occupation.
• Any proposed lease assignment when buying an existing outlet.

Do not assume the franchise agreement itself gives you adequate access to the property. Ask your solicitor to confirm who must approve your occupation and whether those approvals are already in place.

Compare the lease and franchise obligations

Australia specifically regulates franchising through the mandatory federal Franchising Code of Conduct, enforced by the Australian Competition and Consumer Commission. The current Code commenced on 1 April 2025, with transitional arrangements for some requirements. The Australian Consumer Law and general contract law also matter.

Premises arrangements require a separate legal review. State and territory retail leasing laws may apply, depending on the location and type of premises. Their coverage and disclosure requirements differ. A franchise disclosure document is not a substitute for checking any applicable landlord disclosure obligations.

Put the franchise agreement and premises documents side by side. Compare their commencement dates, expiry dates and conditions for occupation. A franchise term that runs beyond your secured occupancy period can leave you without an approved place to trade. A lease that continues after your franchise rights end can leave you paying for premises you can no longer operate under the brand.

Ask your solicitor to examine what happens if either agreement ends or is breached. Does losing the franchise trigger a lease default? Can the franchisor require you to vacate even though you remain liable to the landlord? Could a landlord’s termination of the head lease undermine your occupancy?

Seek written solutions to material mismatches before signing. Do not rely on an assumption that the landlord and franchisor will sort them out later.

Calculate the full cost of occupying the site

The advertised rent is only the starting point. Ask your accountant to build a premises-cost schedule from the actual documents, distinguishing fixed charges, variable charges and contingent liabilities.

Check for:

• Base rent, GST treatment and scheduled rent reviews.
• Turnover rent and the sales included in its calculation.
• Outgoings, utilities and shared property charges.
• Security deposits or bank guarantees.
• Repair, maintenance and servicing obligations.
• End-of-lease removal and make-good requirements.

Where available, request recent outgoings statements and reconciliations for the property. An estimate is not necessarily a cap on what you will pay. Ask which costs the landlord can recover under the lease and applicable law.

Clarify who pays when essential building services fail or need replacement. Responsibility for air conditioning, plumbing or electrical infrastructure can materially affect your costs. A promise that premises are supplied ‘ready to trade’ should not replace a clear allocation of responsibilities.

Confirm the site can legally support the business

Brand approval does not establish that a property can lawfully accommodate every proposed activity. Check the lease’s permitted use, relevant planning permissions and any licences or approvals required for your operation.

For example, a food business may need to investigate ventilation, waste handling and food business requirements. Other operations may need particular access, parking or accessibility arrangements. Obtain advice appropriate to the activity and location rather than assuming the previous tenant’s approvals cover you.

Ask about lease clauses allowing relocation, redevelopment or interruption of access. Establish who bears the resulting costs and whether the franchise agreement accommodates a forced move.

Practical takeaway: Before committing, have your advisers confirm three things in writing: your right to occupy, the full premises liabilities and how the lease interacts with the franchise agreement. Treat unresolved premises risks as purchase decisions, not administrative details.