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Franchising can benefit both the franchisor and the franchisee. For the franchisor, franchising means fast business growth, greater brand visibility and increased profits. For the franchisee, it provides an opportunity to step into an already established brand with a proven business model and clear operational guidelines.
It’s common for successful franchises to perform well, which makes extending or renewing a franchise term an appealing option. However, franchise renewal or extension isn’t always simple – there are specific requirements set out by Australian law that must be carefully followed.
In this article, we’ll outline the franchisor’s obligations for extending or renewing their franchise term in 2025. We’ve updated the information to reflect current practices and regulatory standards.
What Is A Franchise Term? Why Would It Be Extended?
A Franchise Term specifies how long the Franchise Agreement remains in force – these agreements typically run for a fixed period. When business is thriving, both franchisors and franchisees naturally prefer to extend the term rather than starting afresh.
An extension means you should seek legal advice to ensure all details of the extension are properly documented in writing.
If either party decides they no longer wish to continue under the existing Franchise Agreement, they may choose not to renew the term, or to terminate the agreement entirely.
What Do You Need To Do To Extend A Franchise Term?
Before a franchise term concludes, a franchisor must take the following steps:
- Notify franchisees whether you intend to extend the current agreement or initiate a new franchise agreement – this notification is known as the ‘end of term notice’.
- Provide a minimum of 6 months’ notice if the agreement has been in place for longer than 6 months; if the agreement has been active for less than 6 months, at least 1 month’s notice must be given.
- When extending the franchise, the end of term notice must also state that the franchisee is entitled to a copy of the disclosure document.
You can read more about the essential documents franchisors require in our detailed guide here.
What Are Disclosure Obligations?
At the outset of the franchise relationship, you would have provided a disclosure document to the franchisee. What you might not realise is that as a franchisor, you are required to update and maintain this document throughout the duration of the relationship.
Franchise renewals can be complex due to the myriad of regulations enforced across Australia. Our team is always on hand to discuss your options – ensuring you remain compliant with the latest requirements while protecting your business interests.
Franchisees have a legal right to access an up-to-date disclosure document before renewing or extending their franchise agreement; they may request this document annually.
A comprehensive disclosure document should include:
- Details of any legal proceedings or litigation involving the franchisor
- Information on whether the franchisee may extend, renew or enter into a new agreement at the end of the term
- An outline of the fees the franchisee might be required to pay
- Key financial information and performance figures
- Contact details for current and past franchisees
Other Disclosure Obligations Franchisors Need To Comply With
Under the updated Franchising Code of Conduct for 2025, additional disclosure requirements have been introduced. In addition to providing the standard disclosure document:
Franchisors must obtain written confirmation from franchisees that they fully understand the contents of the disclosure document.
- Provide franchisees with a new copy of the Franchise Agreement if any amendments are made, and
- Supply franchisees with an up-to-date copy of the Franchise Code.
What Happens If Franchisors Don’t Comply With The Code?
Failure to adhere to these obligations can result in enforcement action by the ACCC. For instance, a recent case involving the popular franchisor Bob Jane underscored the importance of providing timely, written end of term notices. In this case, Bob Jane did not properly inform franchisees whether they would be extending the current agreement or entering into a new one within the required timeframe.
Moreover, Bob Jane failed to supply the necessary documentation and to obtain written confirmation from franchisees about their understanding of the disclosure document. As a result, the franchisor is now required to implement a compliance program and is bound by a court-enforceable undertaking to fully observe the Franchise Code.
The Code also outlines other important obligations, such as the proper payment of associated franchise fees. It is always wise to speak with a legal professional to ensure that all your franchise practices are compliant and up to date.
What Next?
If you are a franchisor, make sure you comply with the Franchise Code by providing updated disclosure documents and obtaining written confirmation from your franchisees that they understand these documents. It’s imperative to stay organised and meet all required deadlines, ensuring your Franchise Agreement remains compliant throughout its term.
If you are a franchisee, remember that you are entitled to request the latest disclosure documents every 12 months – you don’t need to wait for the franchisor to take the initiative.
If you are either a franchisor or franchisee and need assistance understanding your obligations around renewing or extending your Franchise Agreement, don’t hesitate to contact us on 1800 730 617 or email us at team@sprintlaw.com.au. Our specialist franchise lawyers are ready to guide you through your situation.
Staying informed about legislative updates is crucial as franchising regulations continue to evolve. In 2025, both franchisors and franchisees should regularly review resources such as our Business Structure guide and our Contracts Guide to ensure compliance with the updated Franchise Code and other relevant legislation. You might also find our insights on Industry Regulations useful to fully understand your rights and obligations within today’s franchising landscape.
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