Planning Good Faith Decisions Before Franchising in Australia

When you franchise an existing business, decisions that once affected only your own outlets begin to affect other business owners. A new promotion, operating requirement or service policy can change a franchisee’s costs and workload. Before expanding into Australia’s franchising community, establish a practical process for making and explaining decisions in good faith—not simply a promise to treat people fairly.

Understand what good faith requires

Australia’s Franchising Code of Conduct is a mandatory code regulating relationships within the franchising community. The Australian Competition and Consumer Commission (ACCC) regulates compliance with the Code and the Competition and Consumer Act 2010.

Under the Code, parties must act in good faith in their dealings with one another. The obligation covers proposed franchise relationships as well as existing ones, including pre-contractual negotiations, performance of the agreement, dispute resolution and the end of the relationship.

Good faith involves more than avoiding outright dishonesty. It calls for honest dealings and cooperation towards the purposes of the agreement, rather than arbitrary conduct. However, it does not mean a franchisor must abandon legitimate commercial interests or agree to every franchisee request.

Other legal duties still apply. The Australian Consumer Law prohibits misleading or deceptive conduct, and a decision taken with good intentions can still breach a contract or another legal requirement.

Ask a specialist franchise lawyer to explain how these obligations affect your proposed arrangements. A good faith process is a management safeguard, not a substitute for legal compliance.

Create a decision check before you expand

An owner-operated business may rely on quick conversations and the founder’s judgement. That approach becomes harder to justify when an independent franchisee bears the consequences.

Introduce a short decision brief for proposals that could materially affect franchisees. Use five questions:

• What problem are we solving? Identify the customer, operational or commercial need, supported by available evidence.
• What permits the decision? Check the franchise agreement and applicable law rather than assuming brand ownership gives unlimited authority.
• Who benefits and who bears the cost? Consider franchisee time, staffing, cash requirements and disruption alongside benefits to the network.
• What alternatives exist? Explore a narrower change, a phased introduction or a different implementation method.
• How will we explain and review it? Identify the reasons, notice arrangements and measures of success.

Distinguish between an existing contractual requirement and a proposed change to the agreement. After signing, a franchisor usually cannot change the franchise agreement without the franchisee’s agreement. Calling something an operational update does not settle its legal status.

Assign responsibility for approving significant proposals. In a small business, this might mean the founder obtains an operational assessment and legal advice before announcing a decision, rather than announcing it first and checking afterwards.

Build meaningful consultation into the process

Consultation can expose problems that head office cannot see. It also gives franchisees an opportunity to explain how a proposal would work in their businesses.

It should not be presented as a universal legal requirement or a franchisee veto. Specific consultation or consent obligations depend on the agreement and applicable rules. Nevertheless, seeking views before a decision is final can be a useful way to support good faith dealings.

For example, suppose you want every outlet to extend its opening hours. Explain the customer demand behind the proposal, the hours under consideration and the intended timing. Ask franchisees about staffing availability, local trading patterns and likely additional costs.

Consider the responses genuinely. If different locations face different conditions, assess whether a uniform rule is justified or whether objective exceptions would achieve the same purpose.

Then communicate the outcome, including what changed and why some suggestions were not adopted. Avoid inviting feedback on a supposedly open question when the outcome has already been fixed. If a requirement is non-negotiable, say so and explain its basis.

Prepare for difficult but legitimate decisions

Good faith matters particularly when commercial interests diverge. Before recruiting franchisees, rehearse scenarios such as refusing an exception, requiring a service improvement or withdrawing an unsuccessful initiative.

For each scenario, identify the relevant contractual provisions, the facts you would need and who should review the proposed response. Use consistent criteria while allowing for relevant differences between businesses.

Give your team clear boundaries. They should not promise approval before checking authority, threaten consequences unsupported by the agreement, or describe a discretionary choice as legally compulsory.

Explain adverse decisions calmly and accurately. Acknowledge the franchisee’s position without implying that every disagreement can be resolved in their favour. Review important decisions afterwards to see whether their effects matched the original reasoning.

Practical takeaway: Before offering your first franchise, test one consequential business decision through this process. Check authority, assess both parties’ interests, consider alternatives and explain the outcome. Make that discipline part of how your franchise community operates from the outset.