Legal Considerations When Buying or Selling a Franchise in Australia

Buying or selling a franchise in Australia is a legal process that can often be quite difficult to undertake.

In this guide, we explore what you should consider before committing to buying a franchise.

What should I know before purchasing a franchise?

Pros and cons of owning a franchise

There are several considerations you must consider before purchasing a franchise. Though it is an exciting process ought to be filled with many triumphs and celebratory moments, the journey can also be daunting at times and have you questioning your original decision to commit.  

There are several benefits of owning a franchise. These include:  

• Skip the start-up stage: Arguably, the most difficult phase of owning a business is getting it on its feet. Starting a business can be an extremely difficult process- developing a business plan, conducting market research and creating a product. However, a franchise allows you to skip these steps, minimizing the need to reinvent the wheel. 

• Lower risk: One of the most significant advantages of franchises is the low risk. Franchises already operate on an already tested, successful business model, reducing the risk associated when starting a new venture. A lower risk also means that it will be easier for you to access loans to further help launch your business.  

• Assistance from your franchisor: Franchisees will have ongoing support from their franchisor such as training programs, marketing materials, and ongoing support to help franchisees succeed. This support system can be invaluable, especially for individuals with limited business experience 

However, it is also important to consider the potential disadvantages of owning a franchise as well. These can include:  

• Lack of Autonomy: Franchise agreements often impose strict guidelines on operations, marketing, and training. This can limit the freedom you can have with your business and restrict how you innovate and shape your business. 

• Finances: Not only are initial startup costs high – ranging from the hundred thousands to millions – franchisors will also be under financial commitments such as royalties, establishment fees and ongoing costs. These fees can add up and becoming a heavy financial burden for some, making it essential to consider your financial position before entering an agreement.  

• Potential for conflict: Sometimes, not all things go to plan and disputes may arise between franchisees and franchisors. There will be various legal consequences if you are unable to fulfil your obligations which could result in the loss of your business.  

It is critical to consider both the pros and cons of owning a franchise before entering an agreement. Buying a franchise is a significant decision that comes with both opportunities and challenges, making it important to carefully consider these factors and reflect on what best aligns with your personal and financial goals.  

Consult franchisees and the franchisor

Before committing to a franchise, it’s a good idea to speak to current/ former franchise owners and the franchisor. These conversations can offer valuable, real-world insights that go beyond what is formally provided.  

Reaching out to a former of current franchise owner can help you gain practical insights on the day-to-day realities of the business. Some questions you could potentially ask are:  

• Whether their franchise is successful  

• Whether they feel supported by their franchisor  

• What to expect from owning a franchise 

• What they like/ dislike of being a franchise owner 

• If they are a former franchise owner, why did they resign? 

Communicating directly to the franchisor and asking them questions can also help you come to a decision on whether owning the business is right for you. Each franchisor will have different terms, perks and regulations so it is critical to understand the full scope of what you will be required to do before signing an agreement. Some questions you can ask the franchisor can include:  

• How successful their franchises are 

• How the franchisor will support the franchisee 

• What their expectation of franchisees are 

• How marketing works 

• How training and support works 

• What the culture of the franchise is  

Asking these questions can help you gain an overall view on what being a franchise owner is like and help you come to reach a decision.  

Franchise agreement

Once you have decided whether to own a franchise, you will be required to sign a franchise agreement with your franchisor.

What can be included in the Franchise Agreement?

Franchise Agreements are contracts that outline each party’s rights and obligations to each other. Various terms can be included in the Franchise Agreement, including, but not limited to: 

• The fees and payments the franchisee owes 

• The term of the franchise agreement 

• The rights and restrictions when using the franchisor’s branding and other intellectual property 

• The equipment the franchisee must have prior to conducting business 

• Any rules the franchisee must follow 

• The procedure of settling franchisee-franchisor disputes 

• The procedure for terminating the agreement  

It is essential to have the Franchise Agreement reviewed by a legal professional before signing to ensure that all terms are understood and that the agreement aligns with your business goals. Non-compliance with the Franchise Agreement can lead to resulting in a loss of business. 

Need Help?

At Dettmann Phair lawyers, we understand that navigating commercial law can be difficult.  

Our team of experienced lawyers can help you understand your rights, navigate legal processes, and secure appropriate arrangements in your matter. 

Call us on (02) 9412 4500 or reach out via our contact form for a confidential consultation. 

About the Author

Damian Phair, Principal at Dettmann Phair Lawyers, has over 25 years of legal experience across both family and commercial law.

He is highly regarded for his work in complex family law matters, including parenting disputes, property settlements, and financial agreements, where his pragmatic and client-focused approach have helped families resolve sensitive issues with clarity and care.

Additionally, his expertise in commercial law, advising businesses on complex agreements, dispute resolution, and litigation, has delivered protection, compliance and long-term success for our clients. His strategic mindset and depth of knowledge allow him to guide companies through high-stakes negotiations and legal challenges, protecting their interests while supporting growth.

Whether assisting families through personal transitions or businesses navigating commercial complexities, Damian provides clear, practical, and effective legal solutions.

Email:dphair@dettmanns.com | Phone: 02 9412 4500