Planning Franchise Cooling-Off Procedures in Australia

A signed franchise agreement does not necessarily mean a new opening is certain. When franchising an existing Australian business, you need a practical process for franchisees who exercise cooling-off rights. Planning this before your first agreement helps protect working relationships, manage launch commitments and avoid treating money as available before the legal position is clear.

Understand the cooling-off rules

Australia’s Franchising Code of Conduct is a mandatory code under the Competition and Consumer Act 2010. It regulates the franchising community and gives franchisees cooling-off rights in specified circumstances. The Australian Consumer Law also applies, including its prohibition on misleading or deceptive conduct.

Under the Code, a franchisee can generally terminate a new franchise agreement within 14 days of entering into it. They must notify the franchisor in writing. This is different from the pre-contract disclosure period: allowing someone time to consider documents before signing does not replace their cooling-off rights afterwards.

Premises arrangements can introduce a further timing issue. Where a franchisee leases or occupies premises from the franchisor or an associate, the Code provides rights linked to receiving leasing information. Do not assume the agreement’s signing date is the only date that matters.

In some circumstances, franchisees can opt out of cooling-off rights by written notice. Treat this as a matter for specialist legal advice, not a standard box for every applicant to tick. Your lawyer should identify the rules applying to each proposed arrangement, including transfers and premises arrangements, before you set a launch timetable.

Separate signing from irreversible launch commitments

An existing business often has a straightforward opening routine: order equipment, book contractors and announce a launch. Franchising adds another consideration because a prospective operator may lawfully withdraw after signing.

Create an opening schedule that distinguishes preparatory work from commitments that are expensive or difficult to reverse. For each task, identify:

• Who places the order or makes the booking.
• Who becomes legally responsible for payment.
• Whether cancellation is possible and on what terms.
• Whether the commitment can wait until relevant cooling-off rights have been checked.
• What happens if the franchisee withdraws.

For example, preparing a draft local launch plan is different from commissioning bespoke signage. Reserving a training place is different from purchasing non-refundable travel. The aim is not to stop all activity, but to make each commitment deliberate.

Check third-party contracts separately. Ending a franchise agreement does not necessarily cancel an equipment order, property commitment or other agreement. Make these distinctions clear to the franchisee without suggesting that external commitments remove statutory rights.

Give one person authority to approve early expenditure. Sales enthusiasm should not automatically trigger purchasing, public announcements or access to live customer systems.

Prepare the payment and refund process

Before accepting franchise payments, ask your lawyer and accountant to map what happens if cooling-off rights are exercised. The Code governs repayment obligations and permits deductions only within its rules; the franchise agreement is not a licence to retain whatever the business has spent.

Have your lawyer confirm the applicable repayment deadline, any permitted deductions and how those deductions must be addressed in the agreement. Avoid blanket statements that an initial payment is non-refundable regardless of cooling-off rights.

Build a payment worksheet recording the amount received, payment date, purpose, proposed treatment on withdrawal and supporting evidence for any deduction. This is a practical control rather than a substitute for legal assessment.

Keep sufficient accessible funds to meet potential repayments. An initial franchise payment should not automatically become the budget for unrelated expansion costs while repayment obligations remain possible.

Nominate someone to authorise refunds and a deputy who can act during absences. A legally correct policy is of little use if a payment waits in an unattended inbox.

Rehearse a withdrawal before your first signing

Run a short exercise in which a franchisee sends written notice shortly before an opening milestone. Test whether your team can identify the relevant dates, acknowledge receipt, stop unnecessary commitments and arrange legal review promptly.

Your procedure should cover notice handling, supplier notifications, payment calculations, access removal and the return of materials. Do not add procedural hurdles that could obstruct a valid exercise of rights. Staff should refer uncertain cases for advice rather than reject notices themselves.

Keep communications calm and factual. A franchisee exercising a legal right is not automatically breaching the agreement or acting improperly. Avoid pressure to continue simply because the launch team has already invested time.

Practical takeaway: Before signing your first franchisee, have a lawyer check your cooling-off process, rehearse one withdrawal and confirm that launch commitments and available funds can accommodate it.