Buying a Franchise in Australia: Check Owner-Operator Duties

Buying a franchise does not necessarily mean you can appoint a manager and step back. Some agreements require the owner, or a nominated person, to be actively involved in daily operations. Before joining Australia’s franchising community, establish exactly who must run the business, how much personal involvement is required and what happens when that person is unavailable.

1. Find out who must personally operate the business

Start with the franchise agreement, rather than the sales description. Phrases such as “owner-operated”, “under management” and “flexible ownership” are not substitutes for clearly defined contractual rights.

Look for provisions covering personal supervision, nominated operators, key people and management approval. If you buy through a company, the agreement may still require a named individual to manage the outlet. Using a company does not, by itself, remove personal attendance requirements.

Ask the franchisor:

• Must I work in the business personally, or can I appoint a manager?
• Is there a minimum attendance requirement?
• Must a nominated operator hold an ownership interest?
• Can the same person supervise more than one outlet?
• Are other employment or business interests restricted during the agreement?

Distinguish the outlet’s required opening hours from your own required working hours. An obligation to keep the business open does not necessarily mean you must attend every hour, but neither does permission to employ staff establish a right to delegate overall management.

Ask your solicitor to identify the clauses that answer these questions and flag any wording that leaves the obligation uncertain.

2. Understand the legal framework and approval process

Australia’s mandatory Franchising Code of Conduct regulates the conduct of franchisors and franchisees. The current Code commenced on 1 April 2025, with some requirements introduced later. The Australian Competition and Consumer Commission oversees compliance. The Australian Consumer Law also applies, including its prohibition on misleading or deceptive conduct.

These protections do not create a general right to run a franchise as a passive investment. Your management and attendance obligations will depend substantially on the agreement, subject to applicable law.

The franchisor must provide prescribed pre-contract information, including a disclosure document and the franchise agreement. Use those documents to investigate the operating model, rather than assuming that disclosure amounts to approval of your proposed arrangements.

If managers are permitted, establish how approval works. Request written details of required qualifications, experience, training and any assessment process. Ask who pays for approval and training, and whether a replacement must complete these steps before taking charge.

Also check whether approval can be withdrawn and what would trigger that decision. A business dependent on one approved manager can become difficult to operate if that approval ends unexpectedly.

Where your purchase depends on a particular management arrangement, ask your solicitor how to make it an enforceable part of the deal before you commit.

3. Test what happens during absence or incapacity

An arrangement that works while you are healthy and available may fail during illness, caring responsibilities or extended leave. Test these situations before signing, not when an emergency occurs.

Ask the franchisor to explain the process for a short absence, a longer planned absence and sudden incapacity. Establish whether each situation requires notice, consent or an approved replacement.

Useful questions include:

• Can an existing employee take temporary charge?
• Is there an emergency approval process?
• How long may an interim manager remain in place?
• What happens if no suitable replacement is immediately available?
• Could my absence put the business in breach of the agreement?

Do not assume that a spouse, business partner or family member can automatically take over. They may need approval or training even if they already help in the business.

Prepare a simple continuity plan naming a potential replacement, the approval steps and the person responsible for contacting the franchisor. Have your solicitor assess whether the contractual time limits are workable.

4. Decide whether the obligations fit your ownership plan

Write down the role you actually intend to perform: full-time operator, part-time supervisor or investor using an employed manager. Compare that plan with the agreement’s requirements.

Be particularly cautious about relying on informal flexibility. A franchisor allowing another franchisee to spend less time on site does not establish that you have the same permission. Their agreement or circumstances may differ.

Treat unresolved questions about personal involvement as purchase conditions, not details to settle after opening. If your preferred arrangement is refused, reconsider whether the opportunity suits you rather than assuming the rules will relax later.

Practical takeaway: Before buying, obtain clear written answers about who must operate the franchise, when management can be delegated and how absences are handled. Only proceed when the contractual duties match the ownership role you can realistically fulfil.