Buying a Franchise in Australia: Check Discount Obligations

A national promotion can bring customers through the door without leaving much profit behind. Before buying a franchise in Australia, establish whether you must honour discounts, vouchers and promotional bundles — and who absorbs the cost. Within the franchising community, a shared brand does not necessarily mean the franchisor and franchisee share the financial burden of every offer.

Establish which promotions you must accept

Start with the proposed franchise agreement. The ACCC identifies participation in promotions and local area marketing among the matters a franchise agreement should address. Do not assume that a campaign described as a benefit during the sales process is optional once you become a franchisee.

Ask the franchisor to identify the provisions governing:

• Mandatory participation in national and regional promotions.
• Discounts offered through the brand’s website, app or loyalty programme.
• Vouchers sold elsewhere but redeemed at your outlet.
• Bundled products, complimentary extras and introductory offers.
• Any right to decline a campaign or request an exemption.

Distinguish an obligation to advertise an offer from an obligation to supply it at a particular price. Also establish whether promotional conditions sit in the agreement itself or in separate policies incorporated into it.

Request examples of recent campaigns and their franchisee instructions. These show how the arrangements have worked in practice, although they do not guarantee that future campaigns will operate on the same terms. If the written agreement gives the franchisor broader powers than the examples suggest, assess those powers rather than relying on past restraint.

Follow the money on each redemption

A customer-facing discount is only one part of the calculation. The important question is how much your business retains after supplying the offer and paying the charges attached to the transaction.

For a representative campaign, ask your accountant to build a simple calculation using documented costs:

1. Start with the amount the customer pays, treating GST consistently.
2. Add any confirmed reimbursement from the franchisor or another party.
3. Deduct ingredients, stock, packaging and other direct fulfilment costs.
4. Deduct applicable transaction charges and franchise fees.
5. Allow for additional labour needed to fulfil the offer.

Check which amount is used when transaction-based fees are calculated: the discounted receipt, a standard selling price or another contractual figure. Ask whether reimbursements are automatic, require a claim or depend on meeting conditions.

Timing matters too. If you supply an offer today but receive reimbursement later, your business finances the gap. Obtain the settlement timetable and rules for rejected claims, refunds and cancelled orders.

Do not treat higher turnover as proof of a successful promotion. An offer can increase sales while reducing the cash available to cover rent and other fixed commitments.

Test the operational burden, not just the discount

Promotions can change what customers buy and when they arrive. A discounted bundle might require more preparation time than a full-price purchase, while an app campaign could concentrate orders into an already busy period.

Ask for evidence showing how comparable outlets handled previous campaigns. Useful information includes transaction volumes, average basket values, staffing requirements, stock shortages and the share of customers buying additional full-price items. Treat unsupported claims about repeat visits as assumptions, not established benefits.

Then test three possibilities with your accountant:

• The campaign mainly attracts genuinely additional customers.
• Existing customers switch from full-price purchases to the offer.
• Demand rises, but extra staffing and fulfilment costs absorb the benefit.

Ask how much notice franchisees receive, whether stock must be ordered in advance and who bears the cost of unsold campaign-specific products. Establish what happens if an outlet cannot fulfil an offer because of shortages or capacity limits. A practical exception process is more useful than a general assurance that head office will be flexible.

Resolve the obligations before committing

Australia’s mandatory Franchising Code of Conduct regulates the relationship between franchisors and franchisees. A new Code commenced on 1 April 2025, with some requirements applying from 1 November 2025. The ACCC oversees compliance. The Australian Consumer Law also applies, including its prohibition on misleading or deceptive conduct.

These protections do not mean a compulsory promotion will be profitable. Have a franchise lawyer explain the participation provisions, any discretion to change promotional requirements and the status of written assurances about subsidies or exemptions.

If you need a particular protection to make the purchase viable, seek an agreed contractual provision rather than relying on a sales conversation. This might address reimbursement, campaign notice or an exemption process; the franchisor may not agree to your request.

Practical takeaway: Before signing, trace one realistic promotional sale from customer payment to the amount your outlet retains. Proceed only when you understand both the obligation to participate and the financial consequences.