Buying a Franchise in Australia: Check Territory Rights

A franchise territory can look reassuring on a map without giving you meaningful protection from competing sales. Before buying into Australia’s franchising community, establish exactly where you can trade, who else can serve those customers and whether your boundaries can change. The important question is not simply whether you receive a territory, but what enforceable rights come with it.

1. Establish what the territory actually protects

Start by asking whether the franchise offers an exclusive territory, a non-exclusive territory or permission to operate only from an approved location. These arrangements are not interchangeable.

An exclusive territory may restrict the franchisor from appointing another franchisee within defined boundaries. However, the contract might reserve other ways for the franchisor or related businesses to sell there. A non-exclusive territory may identify your operating area without preventing competition from the same brand.

Ask for a dated map and a written boundary description attached to the agreement. Check that they agree. A shaded sales presentation is not a substitute for a contractual definition.

Clarify whether boundaries follow postcodes, streets, local government areas or another measure. For mobile and home-service franchises, establish whether the relevant location is the customer’s address, the booking address or the place where work is performed.

Put these questions to the franchisor:

• Can another franchisee actively market to customers inside my territory?
• Can they accept unsolicited enquiries from those customers?
• Can I serve customers outside my territory?
• Does the protection cover company-owned outlets and related businesses?
• Are any existing customers or locations excluded?

Ask your solicitor to identify the clauses supporting each answer.

2. Separate geographical protection from sales channels

A geographical territory does not necessarily give you rights to every sale made within it. Online orders, delivery platforms, national accounts, wholesale arrangements and temporary outlets may operate under separate rules.

For example, a franchisee might have protection against another permanent shop opening nearby, while the franchisor retains the right to sell directly online to local residents. That is not automatically unlawful, but it could materially affect the value of the opportunity.

Create a simple channel checklist covering walk-in sales, telephone enquiries, website bookings, app orders, deliveries and business accounts. For each channel, record who receives the enquiry, who performs the work and who receives the income.

Check how a central booking system allocates customers. Does it use postcode, distance, availability or a discretionary decision? Ask what happens when you are temporarily unavailable and whether a customer allocated elsewhere remains with that outlet for future work.

Where national accounts are excluded, request a clear explanation of what qualifies as a national account. A broad definition could remove customers you expected to serve. Treat any promised allocation of local leads as a separate contractual issue rather than an automatic benefit of having a territory.

3. Read territory rights alongside Australian franchise law

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

The Code requires pre-contract disclosure, but disclosure is not a government endorsement of the territory’s commercial value. Nor should you assume that buying a franchise gives you exclusivity by law.

Read the disclosure document’s territory information alongside the franchise agreement, its schedules and any relevant maps. Ask your solicitor to explain discrepancies, exceptions and any wording that leaves allocation decisions to the franchisor.

In most cases, the franchisor must provide the franchise agreement, disclosure document and a copy of the Code at least 14 days before you enter the agreement or make a non-refundable payment. Use that review period to resolve territory questions, rather than merely acknowledging receipt of documents.

If a representative describes the territory as “protected”, ask what that means in contractual terms. Seek advice on potentially misleading statements, but do not rely on a future legal claim to fix an unclear deal.

4. Check whether protection can change

Read beyond the initial boundary description. Some agreements may allow territory changes or make protection conditional on performance.

Identify any sales targets, customer coverage requirements or service standards tied to exclusivity. Ask how performance is measured, whether targets can change and what opportunity you have to remedy a shortfall before losing protection.

Also check whether the franchisor can divide the territory, introduce additional outlets or change lead-allocation rules. Establish what notice, consultation or consent the contract requires. Do not assume you have a veto.

Before signing, prepare a one-page summary of your boundaries, protected channels, exclusions and change provisions. Have your solicitor check it against the proposed agreement.

Practical takeaway: Buy clearly defined territory rights, not a reassuring map. Resolve who can sell where, through which channels and on what conditions before committing your money.