When you buy a franchise, you essentially buy the right to operate a business that is the same as the other businesses in the franchise network.

What is Franchising?

In order for all of the franchised businesses to essentially be the same, the product or service that is sold by each franchise must be consistent.

To achieve consistency, a franchisor may restrict where you purchase the supplies required to operate your business.

This can sometimes mean that the cost of your supplies (or the cost of goods sold) is higher than it otherwise might be if you were operating an independent business.

Starting Your Own Business vs Buying A Franchise

Last week while I was busy ensuring that our franchisor clients had updated their profile on the Franchise Disclosure Register, the Federal Government released its consultation paper on a licensing regime for the franchising sector.

As foreshadowed in its response to the 2023 Review of the Franchising Code of Conduct (the Code), the Government has proposed amendments to the current termination provisions of the Code.

Franchising has long been considered a highly effective strategy for business growth, particularly in Australia. With over 1,100 franchisors and 70,000 franchisees operating across the country, this business model has become a cornerstone of the Australian economy, contributing more than $135 billion annually and employing around 520,000 people.

For many entrepreneurs, franchising offers a seemingly straightforward path to business expansion, leveraging an established brand and proven operational models to penetrate new markets quickly.

The Franchising Code of Conduct (the Franchising Code) provides that certain documents must be given to a franchisee before they enter into a franchise agreement.

Franchise agreement termination is a complex area. In this article we look at the options available to franchisors and franchisees who want to exit a franchise agreement early.

Under the terms of a franchise agreement, a franchisee is given the right to operate the franchise business for a period of time. When the time period expires, the franchise agreement "expires". [What is a Franchise Agreement?]

A franchisor may terminate a franchise agreement early (that is, before the franchise agreement expires), if the franchisor follows the procedures set out in the franchise agreement and the Franchising Code of Conduct (the Franchising Code). [What is the Franchising Code of Conduct?]

If a franchise agreement contains provisions allowing a franchisee to terminate the franchise agreement, a franchisee may terminate a franchise agreement early if the franchisee follows the provisions set out in the franchise agreement.

There are also limited circumstances where a franchisor or franchisee can terminate a franchise agreement at common law. We have not dealt with these circumstances in this article.

Termination Under the Franchising Code of Conduct
Termination Clauses in Franchise Agreements
Legal Procedures for Terminating A Franchise Agreement

On 7 May 2024, the Minister for Small Business, the Hon Julie Collins MP, released the Australian Government's response to the Independent Review of the Franchising Code of Conduct. In this article we consider the recommendations of the Independent Review together with the Government's response.

What is A Franchise Agreement?

One of the disadvantages of buying a franchise is the lack of independence or autonomy in operating the franchise, and the restrictions on decision-making [The advantages and disadvantages of franchising]. How much autonomy a franchisee has in operating their franchise business, will depend on the franchisor, the business operation that the franchisee is wanting to do differently and the reasons why the franchisee is wanting to depart from the franchise offering. While there is a case to be made for some franchisee autonomy, this needs to be balanced with brand consistency . 

What is Franchise Autonomy?
Can Franchisees Adapt Operational Procedures?
Are Franchisees Able to Introduce New Products or Services?
What Level of Autonomy do Franchisees Have in Local Marketing?
Can Franchisees Negotiate with Suppliers Independently?
Challenges of Franchisee Autonomy
Strategies for Balancing Autonomy and Consistency
The Future of Franchisee Autonomy