Franchise your business
Key information
- Franchising can be a way to grow and expand your business. If managed well, it can open your product or service to new markets and extend your brand's reach.
- There is no specific franchise registration or approval process.
- Starting a franchise is a legal process so it's important for you to understand franchisor obligations.
Before you franchise your business
As a franchisor, there are laws you must follow when franchising in Australia, including:
Learn more about the franchising laws including the code or see the Franchisor compliance manual on the Australian Competition and Consumer Commission (ACCC) website.
Operating your own franchise model before selling a franchise to someone else can help to:
- prove your concept
- know the level of demand for your product or service
- create good processes and systems to use in each new franchise.
It’s important to get professional advice from an accountant, lawyer and business adviser with expertise in franchising.
Disclosure obligations
To make sure potential franchisees know what they are getting into, you must provide certain documents and information such as financial details. You must do this before you enter into a franchise agreement and during the agreement.
Before you start an agreement
You must give a potential franchisee:
- an information statement - a document explaining franchising
- a copy of the franchise agreement – this says what you and the franchisee have agreed to do and not do
- a disclosure document – this tells the franchisee important information about you and franchise
- a key facts sheet – that helps the franchisee understand the disclosure document
- a copy of the Franchising Code of Conduct – one of the laws that franchisees and franchisors must follow.
During a franchise agreement
During a franchise agreement, you must give franchisees certain information and documents. There are also documents you must update if franchisees ask for them or certain things change.
Create a franchise profile
All franchisors must create a franchise profile and publish key disclosure information about your franchise on the Franchise Disclosure Register.
Creating and maintaining a public presence on the Franchise Disclosure Register is part of complying with the Franchising Code of Conduct.
Go to the Franchise Disclosure Register to learn more.
Other franchisor obligations
You need to understand your tax obligations and how to treat franchising fees for tax purposes. It's also important to review your income tax and goods and services tax (GST) reporting requirements. Usually, all payments you receive from a franchisee will be assessable income. They will also involve GST.
As with any business, your business structure, assets and income will determine your tax requirements.
Learn more about franchising and tax on the Australian Taxation Office (ATO) website.
You must give franchisees certain documents and information if they're occupying or leasing premises for their franchise from you or an associate of the franchisor.
This includes:
- a copy of the lease
- information that the lessor must give to a lessee under the relevant state or territory retail tenancy laws
- information about any incentive or financial benefit that you or your associate get because of the lease or occupancy arrangement.
If you or your fund administrators operate the marketing fund, you must follow rules in the Franchising Code of Conduct about:
- how the money can be used
- who pays into the fund
- telling franchisees about how the money was collected and spent every financial year.
Learn more about franchise marketing funds on the ACCC website.
By law, you must keep written material that the Franchising Code of Conduct requires, or allows a franchisee or prospective franchisee to give to you.
The documents you must keep include:
- requests for a disclosure document
- notices of dispute
- confirmations of receipt of disclosure document
- professional advice statements
- requests to transfer a franchise to a third party (and any extra information about the transfer)
- requests not to disclose former franchisee details
- any documents that you use to support any claims or statements made in your disclosure document.
You must keep your records for 6 years from when they were created. The ACCC can ask for the records to check your compliance with the Franchising Code of Conduct.
Learn more about record keeping.
Under the Franchising Code of Conduct, parties must act in good faith in their business dealings with each other.
Acting in good faith applies to any matter arising in the franchising relationship, including.
- pre-contractual negotiations
- performance of the contract
- dispute resolution
- the end (including termination) of an agreement.
This may also extend to conduct after a franchise agreement comes to an end. If an agreement imposes obligations that continue after the agreement ends, you or franchisee may be required to carry out these obligations in good faith.
Learn more about acting in good faith under the franchising code on the ACCC website.
You must let franchisees or potential franchisees know in writing within 14 days about certain changes to the franchise.
Learn more about what to do when there is a change to materially relevant facts on the ACCC website.
What to do when things go wrong
If you have a concern with your franchisee, you can:
- formally raise your concerns with them, including through the dispute resolution process in your franchise agreement and under the Franchising Code of Conduct
- get help from the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) or your State Small Business Commissioner
- get independent advice on your rights from a lawyer, accountant, business adviser and industry association.
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