Buying a Franchise in Australia: Check Renewal Rights

When buying a franchise in Australia, look beyond the opening date to the day your agreement expires. Joining a franchise community does not necessarily give you the right to remain in it indefinitely, even if your business performs well. Before committing, establish whether you can renew, what conditions apply and what happens if the relationship ends at the scheduled expiry date.

Separate the initial term from any renewal option

A franchise agreement gives you rights for an agreed period. An advertised opportunity described as having an initial term plus a further term should not be treated as one uninterrupted commitment from the franchisor.

Read the agreement alongside the disclosure document’s end-of-term information. Ask your solicitor to distinguish between:

• A contractual renewal option: a right you may exercise, subject to the precise wording and conditions.
• Renewal at the franchisor’s discretion: a possible further agreement, rather than a guaranteed entitlement.
• An extension: additional time under an existing arrangement, which may involve separate conditions.

Identify the exact commencement and expiry dates. Check whether the term starts when you sign, when you receive access to the premises or when trading begins. Those dates can affect how much trading time you actually receive.

Ask for written clarification of any mismatch between the sales presentation, disclosure document and agreement. A reassuring comment that “everyone gets renewed” is not a substitute for an enforceable contractual right.

Understand the Australian rules on renewal notice

Australia specifically regulates franchising through the mandatory federal Franchising Code of Conduct, enforced by the Australian Competition and Consumer Commission (ACCC). The current Code commenced on 1 April 2025. Australian Consumer Law and general contract law also matter when assessing representations and contractual rights.

Under the Code, a franchisor must notify a franchisee whether it intends to extend the agreement or enter into a new one. Generally, that notice must be given at least six months before the term ends. If the agreement’s term is less than six months, the notice period is at least one month.

A right to receive notice is not a right to renewal. The Code does not make renewal automatic or generally oblige a franchisor to offer another term.

Your agreement may separately require you to exercise an option or request renewal by a particular deadline. Do not assume the franchisor’s notification deadline replaces your own obligations. Ask your solicitor to map both sets of dates and explain what happens if either party misses one.

For an existing agreement, have the solicitor confirm which Code provisions and transitional arrangements apply rather than relying on a generic explanation.

Check the conditions and price of continuing

Renewal can involve more than paying another fee. Before buying, prepare a checklist of every requirement that could affect your ability to continue.

Ask the franchisor:

• Must all breaches have been remedied, and how is compliance assessed?
• Are there sales targets or other performance conditions?
• Must you complete additional training or refurbish the business?
• Is a renewal fee payable, and how is it calculated?
• Must you sign the franchisor’s then-current agreement?
• Can royalties, other charges or operating obligations change for the new term?

These are questions to investigate, not assumptions about every franchise. Ask for the relevant clauses and an explanation of any costs that cannot yet be quantified.

Pay particular attention to a requirement to sign a new agreement. Continuing under the same brand does not necessarily mean continuing on the same commercial terms. Have your solicitor explain how much certainty the current contract provides about the next term.

Ask your accountant to assess renewal-related expenditure separately from the original purchase budget. If a refurbishment is required, establish its likely timing and how the proposed expenditure relates to the length of the further term.

Plan for expiry before committing

Build a simple end-of-term plan before you sign. Record your renewal deadline, the franchisor’s notification deadline and the decisions you would need to make if renewal were refused or commercially unattractive.

Identify obligations that could remain after expiry, such as outstanding borrowing, equipment commitments or premises costs. Check the agreement’s requirements for removing branding, returning confidential materials and dealing with remaining stock. Do not assume that expiry creates an automatic entitlement to compensation for goodwill or your original investment.

Practical takeaway: buy on the strength of the term and rights actually documented. Treat any further term as conditional until your independent advisers have checked the renewal mechanism, deadlines and financial consequences.