Buy a Franchise in Australia 2026: What to Check Before Signing a Franchise Agreement

The Australian business market in 2026 is moving fast. Average advertised prices are up more than 22 percent, and there are over 35,000 active buyers chasing quality opportunities. Franchises tend to attract buyers who want something more structured than a standalone business — and that structure is genuinely useful. But it's not the same as protection, and a franchise agreement is one of the most consequential documents you'll ever put your name to.

This article covers what you need to check before you commit: from the franchise disclosure document to the commercial lease sitting underneath the business. The goal is to help you make that decision with your eyes open.

What Makes Buying a Franchise Different from Buying an Independent Business

When you buy an independent business, you're acquiring assets, goodwill, and operational history. When you buy a franchise, you're also acquiring a relationship — one governed by a contract the franchisor wrote.

That distinction matters. The franchisor's interests and yours aren't always the same. They want the system to grow. You want this specific outlet to be profitable. Those goals overlap most of the time, but not always, and the franchise agreement is where the gaps tend to surface.

In Australia, franchising sits under the Franchising Code of Conduct, a mandatory industry code administered through the Competition and Consumer Act 2010. The Code requires franchisors to provide a disclosure document at least 14 days before you sign anything or hand over any money. That 14-day window is your most important due diligence period. Use every day of it.

The Franchise Disclosure Document: What to Look For

The disclosure document is the franchisor's legal obligation to tell you material facts about the system. It typically runs to dozens of pages. These are the sections that deserve the closest attention.

Financial Performance Data

Franchisors aren't required to provide earnings projections, and many don't. If the disclosure document does include financial performance representations, read the assumptions carefully. If it doesn't, ask directly — and request actual profit and loss data from existing franchisees, not just revenue figures. Revenue without margins tells you almost nothing about whether the business will actually make you money.

Franchisee Turnover

The disclosure document must list how many franchises have been transferred, terminated, or not renewed over the past three years. High turnover is a red flag. A system where franchisees regularly exit early or don't renew is telling you something about the unit economics, the support structure, or both.

Litigation History

Current and recent legal proceedings involving the franchisor must be disclosed. One dispute in a large system isn't unusual. A pattern of disputes — particularly ones where franchisees allege misrepresentation or underpayment — is a different matter entirely.

Rebates and Marketing Fund

Many franchisors receive rebates from approved suppliers. The disclosure document must disclose these. If you're also required to contribute to a marketing fund, the document must explain how that fund is managed and audited. Marketing funds that aren't independently audited have historically been a significant source of franchisee grievances in Australia.

The Franchise Agreement Itself: Key Clauses to Scrutinise

The franchise agreement is the binding contract. It will typically run for five to ten years with renewal options. These are the clauses that most commonly cause problems down the track.

Territory Rights

Does your agreement give you an exclusive territory, or simply a preferred one? The difference is significant. A non-exclusive territory means the franchisor can open another outlet nearby — or sell through competing channels — without breaching your agreement. Get the territorial protection confirmed in writing, and be clear on exactly what it covers.

Renewal Terms

The right to renew is not a guarantee of renewal. Many agreements give the franchisor discretion to refuse renewal if you've had compliance breaches, even minor ones. Check whether renewal is on the same terms, or whether the franchisor can impose new conditions — including higher fees — when the time comes.

Exit Restrictions

What happens if you want to sell before the term ends? Most agreements require franchisor approval of any buyer, which is reasonable. But some also include a right of first refusal, meaning the franchisor can step in and buy the business at the price you've negotiated with a third party. That clause directly affects your exit value and your ability to negotiate a clean sale.

Restraint of Trade

Almost every franchise agreement includes a post-term restraint preventing you from operating a competing business for a period after the agreement ends. These clauses are enforceable in Australia if they're reasonable in scope and duration. Before you sign, understand exactly what you're agreeing not to do — and for how long.

Required Purchases and Approved Suppliers

If the agreement locks you into buying stock, equipment, or services exclusively from the franchisor or approved suppliers, those costs are fixed regardless of what the broader market offers. Build your financial model on those locked-in costs, not on what you might theoretically source elsewhere.

The Property Question: Lease or Licence?

For bricks-and-mortar franchises, the property arrangement is often just as important as the business itself. Two structures are common.

In the first, you sign a commercial lease directly with the landlord. You hold the rights and obligations of a tenant. If the franchise fails, you may still be bound by the lease.

In the second, the franchisor holds the head lease and grants you a sublease or licence to occupy. This is common in food and retail franchising, and it gives the franchisor significant leverage: if your franchise agreement is terminated, you lose the premises too.

Whichever structure applies, have the lease reviewed by a solicitor with commercial property experience. Check that the lease term aligns with the franchise term. A franchise agreement with two five-year options sitting on top of a lease that expires in three years is a real problem. Also check rent review mechanisms, outgoings obligations, and what happens to any fitout you've funded at the end of the lease.

If the acquisition includes a commercial property component — or if you're considering purchasing the freehold as part of the deal — that's a more complex transaction that warrants specialist advice. Everest Commercial Property & Business Brokers works across both business brokerage and commercial property, so the business and property components of a deal can be assessed together rather than in isolation.

Talking to Existing and Former Franchisees

The disclosure document must include a list of current franchisees and those who have left the system in the past three years. Contact them. This is one of the most underused steps in franchise due diligence.

Ask current franchisees whether the support matches what was promised, whether the marketing fund produces real results, and whether they'd buy in again knowing what they know now. Ask former franchisees why they left. The answers won't always be comfortable, but they'll be more reliable than anything in the sales materials.

Be aware that some franchise agreements include non-disparagement clauses that limit what former franchisees will say on the record. If someone is reluctant to talk, that itself is useful information.

Financial Modelling Before You Commit

Before signing anything, build a financial model that reflects your actual circumstances. That means accounting for:

• Total upfront costs: franchise fee, fitout, equipment, working capital, and legal fees
• Ongoing fees: royalties, marketing levies, and technology fees
• Realistic revenue based on comparable outlet data — not the franchisor's best-case projections
• Your own salary or owner's draw, because many franchise financial models treat the owner's labour as free
• Debt service if you're financing part of the purchase

The model should show you the break-even point and a realistic path to positive cash flow. If the numbers only work under optimistic assumptions, that's a risk you should consciously accept — not one you should discover six months after opening.

The Role of a Business Broker in a Franchise Purchase

A franchise purchase sits in an interesting middle ground. The franchisor has its own sales process and often a dedicated franchise development team. That team is skilled at presenting the opportunity. They are not working in your interest.

An independent business broker or adviser can help you assess whether the asking price reflects actual earnings rather than brand value alone. They can also compare the franchise opportunity against independent businesses in the same sector — a comparison the franchisor's team won't make for you.

Where the acquisition also involves commercial property, having a firm that handles both sides of the transaction reduces the risk of the business and property valuations being done in silos. You can explore current listings and get a sense of what's available across the market at everestcpbb.com.au.

Legal Advice Is Not Optional

The Franchising Code of Conduct requires franchisors to obtain a certificate confirming you've received independent legal and financial advice before signing. Some buyers treat this as a box-ticking exercise. It isn't.

A solicitor experienced in franchising will read the agreement looking for clauses that are unusual, one-sided, or inconsistent with what the franchisor has represented verbally. They'll flag the restraint of trade scope, the renewal conditions, and any provisions that give the franchisor unusually broad discretion to terminate. That advice is worth considerably more than its cost relative to the size of the commitment you're making.

A Quick Pre-Signing Checklist

Before you sign a franchise agreement in 2026, confirm you've worked through the following:

• Received and read the full disclosure document at least 14 days before signing
• Reviewed the franchisee turnover data and contacted at least three current and two former franchisees
• Had the franchise agreement reviewed by a solicitor with franchising experience
• Had the lease or property arrangement reviewed by a commercial property solicitor
• Built a financial model using conservative revenue assumptions and your actual cost of capital
• Confirmed territory rights in writing and understood what "exclusive" does and doesn't mean
• Understood the exit provisions, including any right of first refusal
• Confirmed the post-term restraint scope and duration

None of these steps are quick. Together they'll likely take four to six weeks. That's appropriate for a commitment that could run a decade and involve several hundred thousand dollars or more.

FAQs

What does the Franchising Code of Conduct require franchisors to disclose in Australia?
The Code requires franchisors to provide a disclosure document covering financial performance data (if any), franchisee turnover, litigation history, supplier rebates, marketing fund management, and the identity of current and former franchisees. This document must be provided at least 14 days before you sign or pay any money.

Can a franchisor refuse to let me sell my franchise?
Most franchise agreements require franchisor approval of any buyer, and some include a right of first refusal allowing the franchisor to purchase the business at the price you've negotiated with a third party. These clauses are legal in Australia. Review them carefully before signing — they directly affect your exit options and the value you can realise when you sell.

Is a franchise a safer investment than an independent business?
Not necessarily. A franchise gives you a proven system and brand recognition, but it also locks you into fees, approved suppliers, and operating standards that can limit profitability. The safety of any business acquisition comes down to the underlying unit economics, the quality of franchisor support, and the terms of the agreement — not the franchise model itself.

What should I ask existing franchisees during due diligence?
Ask whether the franchisor's support matches what was promised, whether the marketing fund produces measurable results, what the actual hours and owner's draw look like compared to projections, and whether they'd buy in again. Also ask about any compliance issues they've experienced and how the franchisor handled disputes.

How does the property lease affect a franchise purchase?
For bricks-and-mortar franchises, the lease term should align with the franchise agreement term including renewal options. If the franchisor holds the head lease and you hold a sublease, termination of your franchise agreement will typically mean losing the premises as well. Have both the franchise agreement and the lease reviewed by solicitors before signing.

Do I need a business broker to buy a franchise?
You're not required to use one, but an independent broker or adviser can help you assess whether the asking price reflects actual earnings, compare the opportunity against alternatives in the same sector, and identify risks the franchisor's sales process won't surface. For transactions that include a commercial property component, specialist advice covering both the business and the property is particularly valuable.

What financial information should I model before buying a franchise?
Model total upfront costs including the franchise fee, fitout, working capital, and legal fees; ongoing fees including royalties and marketing levies; realistic revenue based on comparable outlet data rather than franchisor projections; your own salary or owner's draw; and debt service if you're financing the purchase. The model should show you the break-even point and a realistic timeline to positive cash flow.

Buying a franchise in Australia in 2026 is a structured process — but that structure only protects you if you actually use it. The disclosure document, the franchise agreement, the lease, and the financial model are each doing a different job. Work through all of them before you commit. If you want support assessing a franchise opportunity or understanding how a commercial property component fits into the transaction, Everest Commercial Property & Business Brokers can help you look at both sides of the deal together.