Bubble tea, hotpot, skewers, bakeries: more and more food brands from China and Asia are recruiting franchisees in Australia. A franchise gives you a brand and a system, but the franchisor drafts the agreement and it often runs five years or longer. The Franchising Code of Conduct requires the franchisor to give you the disclosure document and the franchise agreement at least 14 days before you sign. Use that time to get clear answers to these questions.
- What will it cost in total? Beyond the franchise fee: royalties, marketing fund, training, software and future refurbishments. Ask for it in writing.
- Who must I buy supplies from? If you must use nominated suppliers, who sets the price and does the franchisor receive rebates? The disclosure document should say.
- Is my territory protected? Can the franchisor open nearby, or sell into your area through delivery platforms?
- Who signs the shop lease? Does the lease term match the franchise term, what happens to the lease if the franchise ends early, and do you give a personal guarantee? For Victorian retail leases, see the five-year waiver.
- How are other franchisees doing? The disclosure document lists current and former franchisees. Call several yourself.
- Can I renew at the end? Renewal conditions and fees, and what happens to your equipment and fit-out if the franchisor will not renew.
- What if I want to sell later? Transfers need the franchisor’s consent. Check the conditions, fees and approval time.
- Is there a restraint afterwards? How long and how far you are barred from running a similar business after the agreement ends.
Before and after signing
- The franchisor must get your statement that you received legal, business or accounting advice, or chose not to. Get the advice rather than just signing the waiver.
- There is usually a cooling-off period after signing. Confirm how it is calculated and what is refunded before you sign.
- If the franchisor is in China or overseas, the Australian franchise agreement must still comply with Australian law. Check where disputes would be resolved.
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This article is general information only and is not legal advice. You should not rely on it for any particular matter. For advice on your situation, please book a consultation.
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