Buying a Franchise in Australia: Check Renewal Rights

Joining Australia’s franchising community gives you permission to operate a branded business for a defined period, not necessarily for as long as you wish. Before buying, establish what happens when that period ends. A promising business can still become a difficult purchase if continuing depends on conditions you cannot meet or a decision you cannot control.

1. Distinguish a renewal right from a possibility

Start with the agreement’s commencement date, expiry date and renewal provisions. Then compare them with the franchisor’s explanation of how long you can operate.

A statement such as “a further term is available” does not necessarily give you an enforceable option. The agreement might instead allow you to request renewal, with the decision remaining at the franchisor’s discretion.

Ask your independent franchise solicitor to classify the arrangement:

• A contractual option: you can obtain another term if you exercise the option correctly and satisfy its conditions.
• Renewal by agreement: both parties must agree before you can continue.
• No renewal provision: the contract ends without a contractual entitlement to another term.

Also distinguish an extension of the current agreement from signing a replacement agreement. A replacement may introduce materially different obligations.

Record the answer in plain English: “I have the right to continue if…” or “I can continue only if the franchisor agrees.” If the sales presentation suggests greater certainty than the contract, resolve that discrepancy before signing.

2. Understand the Australian legal position

Australia’s Franchising Code of Conduct is a mandatory code under the Competition and Consumer Act 2010. The Australian Competition and Consumer Commission regulates compliance. A new Code commenced on 1 April 2025, with some further requirements applying from 1 November 2025. Which provisions apply can depend on when an agreement was entered into, transferred, renewed or extended.

The Code does not give franchisees an automatic entitlement to another term. It requires franchisors to notify franchisees whether they intend to extend the agreement or enter into a new one. Ask your solicitor to identify the applicable notice deadline and explain how it interacts with your own contractual deadlines.

Both parties must act in good faith, including in relevant dealings about renewal. However, good faith does not itself create a renewal option where none exists or require a franchisor to disregard its legitimate commercial interests.

The Australian Consumer Law also prohibits misleading or deceptive conduct, and its unfair contract terms protections may apply to eligible standard-form small business contracts. A clause is not necessarily enforceable simply because it appears in the agreement, but neither should you assume that an unfavourable renewal condition is unlawful.

3. Test every renewal condition before committing

Create a checklist containing each condition, the evidence needed to satisfy it and the deadline. Common issues to investigate include:

• whether all fees must be paid and breaches remedied;
• whether past breaches can prevent renewal even after correction;
• whether performance standards are clearly defined;
• whether further training or accreditation is required;
• whether the original owner must remain actively involved;
• whether you must sign the franchisor’s then-current agreement.

Look especially closely at subjective wording such as “to the franchisor’s satisfaction”. Ask what objective evidence is used and whether decisions can be challenged through the agreement’s dispute process.

Do not assume the franchisor’s notice will arrive before you must exercise an option. Have your solicitor map both timelines. A valuable option can be lost if notice is late, sent to the wrong address or delivered by an unapproved method.

Before purchase, seek written clarification or negotiated amendments where conditions are ambiguous. Verbal reassurance is a poor substitute for a workable contractual right.

4. Price the next term separately

Renewal may involve more than a renewal fee. Ask for details of legal or administrative charges, updated operating requirements and any other expenditure attached to continuing. Have your solicitor check whether proposed charges are permitted under the Code.

If renewal requires the then-current agreement, request today’s version as an illustration, while recognising that it cannot establish future terms. Identify whether royalties, technology charges, reporting duties or other obligations could change.

Ask your accountant to assess the renewal decision as a separate commitment. The question is not simply whether you can afford the initial purchase, but whether you could fund the conditions for continuing without accepting an unsuitable replacement contract.

5. Prepare for a genuine end date

Check what happens if renewal is refused or you decline the terms offered. Identify requirements for debranding, returning manuals, transferring telephone numbers, handling customer records and disposing of branded stock. Do not assume compensation or payment for goodwill will be available at ordinary expiry.

Keep written records of renewal discussions and obtain advice promptly if a decision appears inconsistent with the contract or the Code.

Practical takeaway: Before buying, obtain a written renewal checklist covering your entitlement, conditions, deadlines, potential costs and expiry obligations. Treat another term as secure only to the extent your contract and the law support it.