What to Look for When Buying a Franchise in Australia
Buying a franchise in Australia is one of the most significant financial decisions you’ll make. The franchise sector contributes around $181.8 billion to the Australian economy annually — and while there are outstanding opportunities available across almost every industry, not all franchise systems are created equal. Some will deliver strong returns and a genuinely supportive business partnership. Others will lock you into a poorly structured agreement with a franchisor who can’t back up their promises.
The difference between a good franchise investment and a bad one almost always comes down to how thoroughly you do your due diligence before signing. This guide covers the key things to look for, the questions to ask, and the red flags that should make you think twice — so you can make an informed decision with confidence.
What You’ll Learn
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Start With Yourself — Before You Look at Any Franchise
The most common mistake prospective franchisees make is falling in love with a brand before honestly assessing whether it’s the right fit for them. Before you look at a single opportunity, get clear on these fundamentals:
- How much capital do you have available — not just for the franchise fee, but for fit-out, working capital, and professional fees? A good rule of thumb: have at least 30% more than the total investment figure quoted by the franchisor.
- What industry do you want to work in? You’ll be operating this business every day — make sure it’s something you can commit to long-term.
- Are you comfortable following a system? Franchising requires operating within defined boundaries. If you resist structure and want total creative control, franchising may not be the right model for you.
- What does success look like for you? Income replacement, wealth building, lifestyle flexibility, or a stepping stone to something bigger? Your goal shapes which franchise is the right fit.
- Do you have the skills the franchise requires? Some franchises suit people with sales backgrounds; others suit operators, tradespeople, or customer service professionals. Match the franchise’s requirements to your strengths.
10 Things to Assess Before Buying Any Franchise
1. The Franchisor’s Track Record
How long has the franchise system been operating? How many franchisees are currently in the network, and how many have left — and why? A franchisor with a long history, stable network, and low franchisee turnover is a fundamentally different proposition to one that’s only been operating for a year or two. Check the ACCC Franchise Disclosure Register to verify the franchisor’s registration and review publicly available disclosure information.
2. The Unit Economics
The most important question you can ask is: can I make a reasonable return on this investment after all fees and costs? Ask the franchisor for typical franchisee revenue and profit figures — and then verify them with existing franchisees independently. A franchise that looks attractive on the surface can quickly become unviable once you account for royalties (typically 4–9% of gross revenue), marketing levies (1–4%), rent, wages, and cost of goods. Run your own financial model, not just the one the franchisor provides.
3. The Franchise Disclosure Document (FDD)
Under the Franchising Code of Conduct, every franchisor must provide you with a compliant FDD at least 14 days before you sign any agreement or pay any money. Read it in full — or have a specialist franchise lawyer read it for you. The FDD contains critical information about the franchisor’s financial position, litigation history, existing franchisee details, and the key terms of the franchise agreement. If a franchisor is reluctant to provide the FDD or pressures you to sign quickly, walk away.
4. The Franchise Agreement
The franchise agreement is the legal contract that governs every aspect of your relationship with the franchisor for the full term — typically 5 to 10 years. Before signing, have a specialist franchise lawyer review the agreement in full. Key things to understand: the territory and whether it’s exclusive, the term and renewal conditions, the grounds for termination (by both parties), post-term restraint of trade clauses, and what happens to the business if you want to sell or exit early.
5. Speak to Existing and Former Franchisees
This is one of the most valuable pieces of due diligence you can do — and one many prospective franchisees skip. The FDD must include contact details for current and former franchisees. Contact them directly — not just those the franchisor refers you to. Ask about the reality of income, the level of support provided, the franchisor’s responsiveness, and whether they would do it again. Former franchisees in particular can be extremely candid about why they left.
6. The Training and Support Model
What does initial training look like? How long is it, where is it conducted, and what does it cover? What ongoing support is provided after launch — field visits, operations manual updates, marketing support, technology tools? A strong training and support system is one of the key things you’re paying for as a franchisee. If it’s vague or inadequate, the premium you’re paying over running an independent business shrinks significantly.
7. The Marketing Fund
If you’re paying into a marketing levy, you have the right to know how it’s spent. Ask the franchisor for audited marketing fund accounts. The Franchising Code of Conduct requires franchisors to provide franchisees with a financial statement of the marketing fund within 30 days of its financial year end. A well-managed marketing fund drives brand awareness and leads for the whole network — a poorly managed one is money down the drain.
8. Territory Rights
Understand exactly what your territory covers and what protections it provides. Is it exclusive? Can the franchisor open a company-owned store in your area? Can other franchisees in the network sell online into your territory? These questions matter enormously to your long-term revenue. Territory disputes are one of the most common sources of franchise conflict — get absolute clarity on this before you sign.
9. The Exit Options
What happens if you want to sell the business? Can you sell it to anyone, or does the franchisor have right of first refusal? What approval process does a buyer need to go through? Are there transfer fees? What post-term restraints apply — can you operate a similar business after your franchise ends? Understanding the exit before you enter is essential, particularly if you’re planning to build the business as an asset to sell later.
10. The Franchisor’s Financial Health
You’re entering a long-term relationship with this franchisor — potentially 5 to 10 years. Make sure they’ll still be in business. Check the company’s financial statements (included in the FDD), look for any court judgements or ACCC actions against them, and research the brand’s reputation in the market. A franchisor under financial stress cannot support its network effectively — and if the franchisor collapses, franchisees can find themselves in a very difficult position.
Due Diligence Checklist — Quick Reference
| Checklist Item | Check | Red Flag if… |
| Franchisor listed on ACCC Franchise Disclosure Register | ✅ Verified | Not listed — do not proceed |
| FDD provided at least 14 days before signing | ✅ Received | Pressured to sign quickly |
| Franchise Agreement reviewed by specialist lawyer | ✅ Reviewed | Reviewed by general solicitor only |
| Spoken to 3+ current franchisees independently | ✅ Done | Only spoke to franchisor referrals |
| Spoken to former franchisees about why they left | ✅ Done | Franchisor refused to provide details |
| Own financial model built and stress-tested | ✅ Done | Relied only on franchisor projections |
| Marketing fund accounts reviewed | ✅ Reviewed | Franchisor refused to provide |
| Territory rights clearly defined and documented | ✅ Confirmed | Verbal assurances only |
| Exit / transfer conditions understood | ✅ Understood | Not addressed in agreement |
| Franchisor’s financial statements reviewed | ✅ Reviewed | Financials not provided or withheld |
| Independent accountant has reviewed the numbers | ✅ Done | Skipped to save money |
| Working capital buffer of 30%+ accounted for | ✅ Confirmed | Budgeted for minimum investment only |
Red Flags — When to Walk Away
Most franchise opportunities are legitimate — but some are not. The following are serious warning signs that should prompt you to seek independent advice or reconsider altogether:
- Pressure to sign quickly or before the 14-day cooling-off period — this is a breach of the Franchising Code of Conduct
- Inability or unwillingness to provide audited marketing fund accounts
- Reluctance to provide current or former franchisee contact details
- Earnings claims or income guarantees that seem too good to be true — and aren’t backed by verifiable data
- Ongoing litigation between the franchisor and multiple franchisees
- A franchise not listed on the ACCC Franchise Disclosure Register
- Vague or verbal-only territory assurances
- A franchisor who discourages you from getting independent legal or financial advice
| Your Legal Rights as a Prospective Franchisee
Under the Franchising Code of Conduct, you have the right to: receive a compliant FDD at least 14 days before signing; have a 14-day cooling-off period after signing; receive audited marketing fund accounts; access contact details for current and former franchisees; and participate in formal dispute resolution if a dispute arises. The ACCC enforces the Code. If a franchisor is not complying, you can lodge a complaint at accc.gov.au. |
Get Independent Advice — Before You Sign Anything
The Franchising Code of Conduct actually requires franchisors to advise you to seek independent legal and financial advice before signing. This is not just a formality — it is one of the most important steps you can take.
- A specialist franchise lawyer will review your Franchise Agreement and FDD, identify unusual or unfair clauses, and advise you on your rights and obligations
- An accountant with franchising experience will stress-test the financial model, review the FDD financials, and advise on the tax and structural implications of the investment
- A franchise consultant can help you assess the opportunity objectively — including the franchisor’s track record, the market opportunity, and whether the total investment makes sense for your goals
At Franchise Central, we work with prospective franchisees at every stage of the due diligence process — helping them find the right opportunity, understand the documents, and make an informed decision. Our team has seen thousands of franchise agreements and knows what good looks like — and what doesn’t.
| Looking for a Franchise Opportunity in Australia?
Browse current franchise opportunities on the Franchise Central website — or contact our team for guidance on finding the right franchise for your goals, skills, and budget. We work with prospective franchisees at no cost to help them make an informed decision. Browse opportunities: franchisecentral.com.au/opportunities/ | Call: 1300 558 278 |
Frequently Asked Questions
What should I look for when buying a franchise in Australia?
The most important things to assess are: the franchisor’s track record and financial health; whether the unit economics stack up after all fees and costs; the terms of the Franchise Agreement and FDD; what existing and former franchisees say about the system; the quality of training and ongoing support; and whether your territory rights are clearly defined. Always get independent legal and financial advice before signing anything.
How do I check if a franchise is legitimate in Australia?
Check the ACCC Franchise Disclosure Register at accc.gov.au to verify the franchisor is registered. Request the Franchise Disclosure Document and have it reviewed by a specialist franchise lawyer. Contact current and former franchisees directly — not just those the franchisor refers you to. Check for any court judgements or ACCC enforcement actions against the franchisor or its directors.
What is franchise due diligence?
Franchise due diligence is the process of thoroughly investigating a franchise opportunity before committing to it. It includes reviewing the Franchise Disclosure Document and Franchise Agreement, speaking independently with existing and former franchisees, building your own financial model (not just the franchisor’s), verifying the franchisor’s financial health and track record, and getting independent legal and accounting advice. Good due diligence takes time — typically 4 to 8 weeks — but it can save you from a very costly mistake.
What are the biggest red flags when buying a franchise?
The most serious red flags are: pressure to sign before the 14-day cooling-off period; a franchisor not listed on the ACCC Franchise Disclosure Register; refusal to provide audited marketing fund accounts or franchisee contact details; earnings claims that can’t be independently verified; ongoing litigation with multiple franchisees; and any discouragement from seeking independent legal or financial advice.
Do I need a lawyer to buy a franchise in Australia?
Yes — strongly recommended. The Franchising Code of Conduct requires franchisors to advise you to seek independent legal advice before signing. A specialist franchise lawyer (not a general commercial solicitor) will identify unusual or unfair clauses in your agreement, explain your rights and obligations, and advise on any areas of concern. The cost of a legal review is modest compared to the total investment you’re making.
How long does the franchise buying process take in Australia?
From initial enquiry through to signing a franchise agreement, the process typically takes 2 to 4 months. This includes receiving and reviewing the FDD (minimum 14 days before signing), conducting due diligence including franchisee interviews and financial modelling, completing your legal review, and arranging finance if required. Rushing this process is one of the most common mistakes prospective franchisees make.