Buying a Franchise in Australia: Good Faith Before You Sign

How a franchisor handles negotiations can tell you much about the relationship you are considering. In Australia’s franchising community, good faith is more than a desirable attitude: it is a legal obligation that can apply before you sign. Understanding its scope helps you assess the franchisor’s conduct, manage your own responsibilities and recognise when to pause the purchase.

Understand what good faith requires

Australia’s Franchising Code of Conduct is a mandatory code under the Competition and Consumer Act 2010. A new Code commenced on 1 April 2025, with some additional requirements applying from 1 November 2025. It requires parties to act in good faith in their dealings with each other, including those proposing to enter a franchise agreement.

Broadly, good faith involves acting honestly and not arbitrarily, and cooperating to achieve the purposes of the agreement. Whether particular conduct breaches the obligation depends on the circumstances. A franchise lawyer can help distinguish a genuine legal concern from an ordinary commercial disagreement.

The obligation does not mean the franchisor must accept your preferred price, change its business model or put your interests ahead of its own. Parties can pursue their legitimate commercial interests. Nor does good faith guarantee that negotiations will result in an agreement.

Importantly, the obligation cannot simply be excluded by a contract clause. It also sits alongside other protections, including the Australian Consumer Law’s prohibition on misleading or deceptive conduct. These are related safeguards, but they are not interchangeable legal tests.

Examine how the franchisor handles your questions

Use negotiations to assess how the franchisor responds to reasonable requests for clarification. A polished presentation matters less than a consistent, considered explanation of what you will be expected to do.

For example, suppose the franchisor introduces a new condition after you have spent time assessing the opportunity. Ask what changed, why the condition is necessary and how it affects the proposed arrangement. A change is not automatically evidence of bad faith. Its explanation, timing and handling matter.

Useful questions include:

• Which proposed terms are negotiable, and which are standard across the network?
• Who has authority to approve a departure from the standard agreement?
• If an answer requires further investigation, when should I expect a response?
• What happens if either party decides not to proceed?

Look for a willingness to address substantive questions rather than repeated pressure to commit. An unexplained refusal to clarify a material obligation, contradictory responses or shifting requirements should prompt further examination, not an immediate legal conclusion.

Keep a dated list of unresolved issues. Its purpose is to support a clear decision, rather than to label every difficult conversation a breach of the Code.

Apply the same standard to your own conduct

Good faith is not a one-way protection for buyers. A prospective franchisee should also approach negotiations honestly and constructively.

Be accurate about your experience, available funds and intended involvement in the business. If your application assumes that a business partner will work full-time, tell the franchisor if that arrangement changes. Do not allow negotiations to continue on an important assumption you know is no longer correct.

Respond reasonably to legitimate requests for information. Where a request seems excessive or sensitive, ask why the information is needed and how it will be handled rather than supplying inaccurate details.

You can still negotiate firmly, decline an unsuitable proposal and seek independent advice. Good faith does not require you to abandon sensible financial limits or proceed merely because the franchisor has invested time in your application.

If you are not ready to decide, say what remains outstanding. A clear explanation is more useful than suggesting approval is imminent while privately treating the proposal as unworkable.

Set a decision point before committing

Before signing or paying money, review both the proposed terms and the way negotiations have been conducted. Separate your outstanding issues into three groups: questions requiring facts, terms requiring negotiation and concerns requiring legal advice.

Ask your lawyer to assess any concerning conduct in context. Provide the sequence of events and relevant correspondence, not simply a conclusion that the franchisor has acted unfairly. This helps the adviser identify which legal obligation, if any, may be engaged.

Do not treat the good-faith obligation as a substitute for acceptable written terms. A promise to behave reasonably later will not necessarily resolve an unclear responsibility today. Equally, a firm refusal to negotiate is not, by itself, proof of bad faith.

Practical takeaway: assess honesty, consistency and cooperation on both sides before committing. Resolve material uncertainties, obtain advice on concerning behaviour and proceed only when the proposed relationship—not just the brand—makes commercial sense.