Buying a Franchise in Australia: Check Refurbishment Costs

A franchise outlet can look ready for business while carrying an expensive obligation to refurbish later. New signage, replacement counters or a redesigned customer area may become your responsibility after purchase. Before joining Australia’s franchising community, establish what upgrades could be required during your agreement, who decides their scope and how you would pay for them.

Identify the upgrades behind the purchase price

Separate the initial fit-out from work that might be required once you are trading. An opening budget may cover everything needed to launch without allowing for a later brand refresh. When buying an established outlet, an attractive purchase price may reflect an approaching refurbishment deadline.

Ask the franchisor for a written schedule of known or proposed upgrades affecting your outlet. Request details of:

• Required work, including signage, furniture, fixtures and technology.
• Expected timing and any deadlines already communicated.
• Whether requirements apply to every outlet or depend on condition.
• Available cost estimates and what those estimates exclude.
• Who pays for design, approvals, installation and removal of old fittings.

Ask whether the outlet meets the brand’s current presentation standards. If not, establish whether you must correct the shortfall immediately after purchase. Do not assume that approval of the sale means the premises can remain unchanged.

For an existing outlet, obtain relevant inspection reports, refurbishment notices and correspondence from the seller, with appropriate permission. Compare these with the franchisor’s answers.

Understand the Code’s capital expenditure protections

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 rules affecting how particular provisions apply. The Australian Consumer Law and general contract law also matter.

The Code restricts the circumstances in which a franchisor can require significant capital expenditure during a franchise agreement. These rules are relevant to substantial refits, but they are not a blanket ban on refurbishment costs.

Disclosure before entering into or renewing an agreement is one permitted basis for requiring significant capital expenditure. Other circumstances can also permit it. Have a franchise lawyer check the applicable rules and whether the proposed expenditure falls within them.

Where significant capital expenditure is disclosed, the Code requires information about it and a discussion before entry or renewal. That discussion includes the circumstances in which the franchisee considers they are likely to recoup the expenditure, having regard to the geographical area of operations.

Ask your lawyer to examine whether the disclosure adequately describes the proposed work. A broad warning that the brand may change does not tell you what a particular refurbishment will cost or establish that every later demand is lawful.

Price the disruption, not just the building work

A contractor’s estimate is only part of the financial assessment. Refurbishment can interrupt trading, reduce customer access and create temporary operating costs.

Ask your accountant to model the work as a separate event within your cash-flow forecast. Include design fees, necessary approvals, installation, waste removal and any professional costs. Check whether estimates include GST and discuss its cash-flow treatment.

Then assess the trading consequences:

• Must the outlet close completely, or can work be staged?
• Will rent, wages and other commitments continue during closure?
• Will stock need to be moved, protected or discarded?
• Could reopening require extra cleaning, staff time or customer communication?

Use a realistic delay scenario rather than assuming work finishes exactly on schedule. If borrowing would be needed, assess the repayments alongside existing commitments.

Treat claims that a refit will increase sales as assumptions to test, not guaranteed benefits. Ask what evidence supports them and whether comparable outlets experienced similar disruption, local demand and trading conditions.

Resolve the obligation before committing

Create a refurbishment checklist matching each proposed expense to its timing, supporting document and responsible party. Mark unresolved items clearly rather than entering a zero cost.

Ask your solicitor to reconcile the disclosure document, franchise agreement and any outlet-specific refurbishment schedule. If the franchisor agrees to defer work, limit its scope or contribute towards costs, have that agreement recorded appropriately in the contractual documents.

For an existing outlet, clarify whether the seller will complete outstanding work or whether you are accepting it. Reflect that allocation in the purchase arrangements rather than relying on an informal understanding.

Practical takeaway: Before signing, obtain a documented refurbishment scope, an independently checked budget and legal advice on when the franchisor can require the work. An affordable purchase should remain manageable when the outlet needs updating.