Planning Customer Refunds Before Franchising in Australia

When you run a single business, a customer complaint may reach you directly and be resolved immediately. Franchising introduces separate business owners, shared branding and sometimes centralised payments. Before expanding, decide who will respond, who can authorise a remedy and who ultimately bears the cost. Clear arrangements protect customers and help your franchise community work together without confusion.

1. Map who supplies the customer

Start with the customer journey, not a standard refund policy. For every sales channel, identify the legal entity supplying the goods or services, the entity taking payment and the business responsible for fulfilment. These may not always be the same.

Consider purchases made at a franchise outlet, bookings through your website, deliveries arranged centrally and work completed by one franchisee for a customer originally acquired by another. A shared trading name does not, by itself, resolve who contracted with the customer.

Create a responsibility table covering:

• Who is identified as the supplier on receipts, booking confirmations and terms.
• Where the customer should first request help.
• Who can inspect goods or assess a service complaint.
• Who can authorise and process a repair, replacement or refund.
• How costs are allocated between the franchisor and franchisee.

Ask a lawyer to check that the customer-facing documents reflect the actual transaction. Do not assume that routing payment through head office automatically makes head office the supplier, or that calling an outlet independently owned removes every possible obligation from the franchisor.

2. Build the policy around Australian consumer law

The Australian Consumer Law (ACL), contained in the Competition and Consumer Act 2010, provides consumer guarantees for most goods and services supplied to consumers. These rights cannot simply be excluded by a franchise agreement, receipt notice or brand-wide refund policy.

The appropriate remedy depends on the circumstances, including whether a failure is major or minor and whether goods or services are involved. For example, a consumer can generally choose a refund or replacement for goods with a major failure. For a minor failure, the supplier generally has an opportunity to fix the problem within a reasonable time.

Avoid blanket statements such as “no refunds” or “all complaints must go to the manufacturer”. A supplier cannot simply send a customer away to a manufacturer instead of meeting its own consumer guarantee obligations. Proof of purchase may be needed, but an original paper receipt is not necessarily the only acceptable evidence.

Separate three types of request:

• Consumer guarantee remedies: legal entitlements that the relevant business must honour.
• Change-of-mind returns: usually governed by the business’s stated policy rather than an automatic ACL entitlement.
• Goodwill gestures: discretionary assistance beyond legal obligations.

Have a consumer law adviser review the policy and any exceptions. Keep the language understandable enough for staff to explain without making legal judgments beyond their competence.

3. Agree authority and cost allocation before launch

A promise that customers can obtain help from any outlet needs an operational and financial arrangement behind it. Otherwise, one franchisee may fund remedies for another outlet’s sale, or customers may be passed repeatedly between businesses.

Decide whether another outlet can accept returned goods, whether head office can issue refunds on a franchisee’s behalf, and how reimbursement will work. Specify the evidence required, reconciliation process and treatment of delivery charges or payment processing costs. Internal settlement arrangements must not delay a customer’s legal remedy.

Australia’s mandatory Franchising Code of Conduct regulates franchise relationships and is enforced by the Australian Competition and Consumer Commission. A new Code commenced on 1 April 2025, with some requirements applying from 1 November 2025. Its good faith obligation is relevant when designing and administering shared complaint arrangements.

Ask your franchise lawyer to align the agreement, disclosure document and customer policy. Any compulsory contributions or deductions connected with central complaint handling should be reviewed for appropriate contractual authority and disclosure. Broad powers to debit franchisees automatically also need scrutiny under applicable unfair contract terms laws.

Distinguish responsibility for faulty local service from responsibility for a misleading national promotion or a central booking error. Allocate costs on an evidence-based basis rather than assuming every complaint belongs to the outlet nearest the customer.

4. Rehearse difficult cases before expansion

Run practical exercises using realistic complaints. Try a defective item bought online and returned locally, a partially completed service, and a customer requesting a refund without a paper receipt.

Check whether staff can identify the supplier, recognise a potential consumer guarantee issue and escalate it promptly. Give them clear authority for routine remedies and an accessible contact for uncertain cases. A goodwill approval limit should never be presented as a limit on statutory rights.

Track complaint themes as well as resolution times. Repeated failures may reveal a product, booking or advertising problem that requires a system-wide correction rather than another individual refund.

Practical takeaway: Before offering your first franchise, approve a customer responsibility map, a legally reviewed remedy policy and a fair reimbursement process. Customers should receive a clear answer while the businesses resolve cost allocation behind the scenes.