Buying a Franchise in Australia: Understand Cooling-Off Rights

Signing a franchise agreement is a major commitment, but Australian law generally gives buyers of a new franchise a short opportunity to reconsider. Understanding that protection before signing helps you avoid rushed decisions and unexpected costs. For anyone joining the franchising community, the key is knowing not just whether cooling-off applies, but what it will—and will not—unwind.

Know which protection applies to your purchase

Australia’s mandatory Franchising Code of Conduct regulates the relationship between franchisors and franchisees. The current Code commenced on 1 April 2025 and is enforced by the Australian Competition and Consumer Commission (ACCC). The Australian Consumer Law and general contract law also remain relevant.

There is generally a 14-day cooling-off period after you sign a new franchise agreement. Cooling-off rights can also apply when an existing agreement is transferred to a new franchisee. However, the precise entitlement and timing depend on the transaction and the applicable Code provisions.

Ask your franchise solicitor to confirm:

• Whether your particular purchase carries a cooling-off right.
• The event that starts the period and the exact expiry date.
• Whether the provision of leasing information affects the deadline.
• Whether any exception or permitted waiver applies to your circumstances.
• How and to whom you must give notice.

Do not confuse cooling-off with the pre-signing disclosure period. Disclosure gives you time to examine the proposal before committing; cooling-off provides a limited opportunity to withdraw afterwards. Nor is cooling-off the same as negotiating an early exit months into running the business.

Have the confirmed deadline recorded in your purchase checklist rather than relying on a salesperson’s informal explanation.

Establish what you would actually get back

Cooling-off generally allows you to end the agreement and recover payments made to the franchisor, subject to permitted deductions. It does not necessarily mean a cost-free change of mind.

The franchisor may retain reasonable expenses incurred, provided the expenses or their method of calculation have been set out in the agreement. Under the Code’s cooling-off refund rules, the franchisor generally must return the relevant payments within 14 days of termination.

Before signing, locate the clause dealing with deductions. Ask for a written explanation of which expenses could arise immediately and how each would be calculated. Where possible, request an estimate based on your planned signing and training timetable.

Questions worth asking include:

• Could training delivered during cooling-off generate a deduction?
• Are document preparation or administration expenses identified?
• How will the franchisor substantiate any amount retained?
• Does the agreement describe specific costs or leave the calculation unclear?

A contractual label does not settle whether a deduction is permitted or reasonable. Ask your solicitor to assess the clause rather than assuming every listed charge is enforceable.

Keep a payment schedule showing each amount, its recipient, its purpose and the refund terms. This makes it easier to distinguish money paid to the franchisor from money paid elsewhere.

Separate the franchise agreement from other commitments

Cancelling a franchise agreement does not automatically cancel every arrangement made in preparation for opening. This is where an apparently reassuring cooling-off right can leave a buyer exposed.

You may already have signed a premises lease, ordered equipment, engaged a contractor or accepted finance. Those arrangements have their own terms. Payments to third parties are not automatically recoverable through the franchise cooling-off process.

For each proposed commitment, record:

• Who the contracting parties are.
• When the obligation becomes binding.
• Whether cancellation is allowed and at what cost.
• Whether it can be made conditional on proceeding with the franchise.

For example, a buyer might validly withdraw from the franchise but still owe a deposit to an independent fit-out contractor. The franchise refund would not necessarily cover that loss.

Where commercially possible, defer irreversible spending until the cooling-off period ends. If an early commitment is unavoidable, ask your adviser to negotiate suitable conditions before signing it. Do not assume a promise that “everything is refundable” covers separate contracts.

Prepare a clear withdrawal process

If you decide not to proceed, act promptly. Do not let informal discussions about revised terms consume the remaining time.

Have your solicitor prepare or check written notice that clearly identifies the agreement and communicates your decision to terminate under the applicable cooling-off right. Follow the required service arrangements and retain evidence of delivery. A telephone conversation alone creates unnecessary uncertainty.

Request written acknowledgement, a refund calculation and an explanation of any deductions. Keep the signed agreement, payment receipts, notice and correspondence together. Separately contact other suppliers or counterparties about their cancellation requirements.

Practical takeaway: Before signing, confirm your cooling-off deadline, likely deductions and separate contractual exposure. Treat cooling-off as a limited safeguard—not a replacement for completing due diligence before committing.