Planning Franchise Premises and Leases in Australia

A successful shop, café or service centre does not automatically provide a workable premises model for franchisees. Before franchising an existing Australian business, decide who will control each site, who will carry the lease obligations and what happens when occupation ends. These decisions help create a stable franchising community rather than a network tied to unsuitable property commitments.

1. Choose who will hold the lease

Start by comparing your existing premises arrangements with the structure you intend to offer franchisees. A lease negotiated for your original business may not allow subletting, licensing occupation or transferring the lease without the landlord’s consent.

There are three common approaches:

• The franchisee leases directly from the landlord. The franchisee takes on the tenant’s obligations. Your ability to influence occupation, alterations or a future transfer depends on the documents and any agreement with the landlord.
• The franchisor holds the head lease and sublets. This can provide greater control over the site, but leaves the franchisor exposed to obligations under the head lease, even if the franchisee stops paying.
• The franchisor grants an occupancy licence. This may suit some arrangements, but its legal effect depends on its substance, not simply its title. Obtain advice about whether leasing protections apply.

Do not select a structure solely because it offers more control. Assess the rent exposure, guarantees, administration and consequences of a vacancy. A franchisor taking multiple head leases needs the financial capacity to support those commitments independently of expected franchise growth.

2. Align occupation with the franchise term

Put the proposed lease, occupancy agreement and franchise agreement side by side. Record their commencement dates, expiry dates, renewal options and notice requirements.

A franchisee should understand whether the right to occupy the premises lasts as long as the right to operate the franchise. Equally, avoid leaving a franchisee with a lengthy lease obligation after their right to use your brand has ended, without a clearly explained plan.

Ask your advisers to test practical scenarios:

• The lease expires before the franchise agreement.
• A renewal option exists, but its exercise deadline is missed.
• The landlord requires relocation or exercises a demolition clause.
• The franchisee wants to sell, but the landlord has not approved the incoming tenant.
• The franchise agreement ends while rent and make-good obligations continue.

Australia’s Franchising Code of Conduct is a mandatory code under the Competition and Consumer Act 2010, enforced by the Australian Competition and Consumer Commission. For franchise agreements entered into, renewed or extended on or after 1 November 2025, the agreement must provide a reasonable opportunity to make a return, during its term, on investment required by the franchisor.

That is not a profit guarantee. However, uncertain or inadequate site tenure should be examined when assessing whether the proposed arrangement supports that opportunity. Do not assume a discretionary franchise renewal will resolve a mismatch.

3. Build property disclosure into the process

The Code imposes additional information and document requirements where a franchisee leases or occupies premises from the franchisor or an associate. Have a franchise lawyer identify the requirements for your chosen structure before offering sites.

Separately, state and territory retail leasing laws may apply. Their coverage, disclosure requirements and tenant protections vary, so a single national lease template is not enough. An occupancy arrangement may need to satisfy both the Code and the relevant local leasing law.

Prepare a site information pack for legal review containing:

• The proposed lease and any sublease or occupancy licence.
• Available details of rent, reviews, outgoings, security and guarantees.
• Permitted use, trading hours and restrictions on signage or alterations.
• Renewal, relocation, demolition, assignment and make-good provisions.
• Required landlord consents and their current status.

Distinguish confirmed obligations from estimates and unresolved negotiations. The Australian Consumer Law prohibits misleading or deceptive conduct: describing a site as ‘secured’ when material consent remains outstanding can create a misleading impression. Both parties must also act in good faith under the Code.

4. Set a premises approval gate

Before committing to a site, require a documented review by the people responsible for property, finance and franchise legal advice. Check permitted use, necessary approvals, access, utilities and whether the premises can support your operating requirements.

Identify who pays rent before opening and what happens if landlord works, approvals or possession are delayed. Coordinate binding commitments carefully; franchise cooling-off rights should not be assumed to cancel separate property obligations.

Finally, map responsibility for lease notices, landlord communications and exit works. Encourage prospective franchisees to obtain independent property and franchise advice, rather than treating your site approval as protection of their interests.

Practical takeaway: Before offering your first premises-based franchise, have advisers review one complete site arrangement—from lease signature to eventual exit. Resolve tenure gaps, consent conditions and ongoing liabilities before repeating that model.