Planning Franchise Renewals Before Expanding in Australia

Before franchising your existing Australian business, decide what happens when the first agreement expires. Renewal arrangements shape franchisee confidence, business continuity and your ability to develop the brand. A clear policy helps build a stable franchising community without promising an indefinite relationship or leaving important decisions until the final months.

1. Distinguish renewal rights from renewal expectations

Start with a commercial decision: will franchisees have an option to renew if they meet stated conditions, or will a further agreement depend on a fresh decision by both parties? These are different arrangements. Your franchise lawyer should translate your choice into terms that match your disclosure document and recruitment conversations.

The Australian Competition and Consumer Commission (ACCC) explains that franchisees are not automatically entitled to a further term. Avoid casual assurances such as ‘you can keep renewing’ unless the agreement genuinely provides that right.

Prepare a short renewal brief covering:

• Whether a contractual renewal option exists.
• The length of any further term.
• The conditions attached to exercising an option.
• Whether the franchisee must sign a new agreement, and how its terms may differ.
• What happens if either party does not wish to continue.

Do not confuse renewal with an extension. Extending an existing agreement to keep trading temporarily can have legal consequences of its own; it should not be treated as an informal administrative favour.

2. Build Australian legal requirements into the policy

Australia regulates franchising through the mandatory Franchising Code of Conduct under the Competition and Consumer Act 2010. The ACCC enforces the Code. The current Code commenced on 1 April 2025, with some requirements applying from 1 November 2025.

The Code requires franchisors to notify franchisees about whether they intend to extend the agreement or enter into a new one. Ask your lawyer to identify the applicable notice deadline for your proposed agreement length and build it into your timetable. An internal renewal policy cannot replace the Code’s requirements or a contractual option.

Parties must also act in good faith. Give renewal applications genuine consideration, apply stated criteria consistently and explain decisions clearly. Good faith does not itself create an automatic right to renewal.

For 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. This is not a guarantee of profit. However, a proposed renewal term needs careful assessment if you require fresh investment as a condition of continuing.

The Australian Consumer Law also matters: misleading assurances about renewal can create risk, while unfair contract terms laws may apply to standard-form small business agreements. Have your lawyer review broad discretionary powers rather than assuming that a signed clause is necessarily enforceable.

3. Create a fair, evidence-based renewal assessment

Design your assessment before recruiting the first franchisee. Conditions should be understandable, relevant to operating the business and capable of being evidenced.

For example, you might assess whether payments are up to date, required licences remain valid, and material operational breaches have been addressed. Distinguish unresolved serious issues from minor historical mistakes. Avoid vague tests such as whether an operator has shown ‘enough enthusiasm’.

Use a simple assessment sheet with four columns: requirement, evidence, unresolved issue and responsible decision-maker. Include a way for franchisees to correct inaccurate information or respond to concerns.

Keep renewal assessment separate from negotiating new commercial terms. A franchisee should be able to understand whether the obstacle is their performance, a proposed change to the business model or disagreement about the next contract.

Before requiring upgrades, ask your accountant to assess the proposed investment against the further term and realistic operating assumptions. Do not rely on an uncertain future resale price or another unpromised renewal to make the proposal appear viable. Obtain legal advice on the Code’s investment and disclosure requirements.

4. Plan both continuation and an orderly departure

Work backwards from expiry. Allow time for assessment, required notices, legal advice, applicable disclosure obligations and signing. Identify who owns each step and who can authorise a renewal or extension.

If renewal will not proceed, an agreed timetable should address practical matters such as:

• Completing outstanding customer orders and handling prepaid services.
• Removing branding and ending access to business systems.
• Returning confidential materials and dealing lawfully with customer information.
• Resolving stock, equipment and outstanding account arrangements.
• Communicating the change without misleading customers.

Do not assume you can take over the franchisee’s assets, customer records or premises. Any such arrangement needs an appropriate contractual and legal basis. Likewise, do not allow trading to drift beyond expiry without advice on the resulting relationship.

Practical takeaway: Before offering your first franchise, have a lawyer-reviewed renewal policy, a clear assessment process and an expiry timetable. Plan a workable ending as carefully as a successful beginning.