Franchise Disputes: Lessons From Nando’s Australian Legal Cases

Australia’s franchise sector is massive – and quick‑service restaurant brands like Nando’s often feature in the most high‑profile disputes. If you’re a franchisor or franchisee, those headlines aren’t just interesting trivia. They’re practical reminders of what works, what doesn’t, and how to protect your position before problems escalate.

In this guide, we unpack the common pressure points that regularly surface in disputes involving major franchise networks (including those reported around Nando’s in Australia over the years), and translate them into clear, actionable lessons you can apply in your own business. We’ll look at what usually goes wrong, the legal obligations that matter most, how to prevent issues, and the steps to take if a dispute does break out.

Our aim is to help you manage risk confidently so you can focus on running a successful franchise, the right way.

Why Do Franchise Disputes Happen In Australia?

Franchising is powerful because it’s built on a shared brand and a standard way of doing business. But that also means both sides rely heavily on each other. Disputes often arise when expectations aren’t aligned, or when obligations under the franchise agreement or the Franchising Code of Conduct (the Code) aren’t followed.

Publicly reported disputes in large networks, including those associated with Nando’s in Australia, tend to cluster around familiar themes. While every matter turns on its facts, the patterns are consistent:

• Disagreements over performance standards, pricing and supply terms (including approved suppliers and rebates).
• Termination rights, breach notices, and exit processes (renewals, transfers and handovers).
• Brand use and system standards (approved products, uniforms, fit‑out, marketing claims).
• Marketing fund governance and transparency around spending and reporting.
• Occupancy complications (especially where the franchisor holds the head lease and the franchisee subleases).
• Post‑termination restraints and the opening of competing businesses nearby.
• Employment compliance at the store level (award wages, rostering, accurate timekeeping).

The good news: most of these issues can be anticipated – and managed – with clear documents, transparent communication and early legal advice.

Key Legal Lessons From Nando’s‑Style Disputes

1) Good Faith Under The Code Is Real – And Enforceable

Both franchisors and franchisees must act in good faith in all dealings relating to the franchise. In practice, that means being honest, cooperative and fair when exercising contractual rights (approvals, renewals, withholding consent, enforcing standards, and so on).

If a party uses a technical right in a way that’s commercially punitive or designed to “squeeze” the other side, it can attract scrutiny. Keep a clear paper trail showing you gave reasonable notice, explained decisions, and tried to resolve issues early. It’s not just optics – it supports your legal position.

2) Termination And Breach: Follow Process To The Letter

Many disputes flare because a party rushes a termination or skips a step. The safest approach is to follow the notice‑to‑remedy process precisely, including the timing, content and delivery method set out in the franchise agreement.

If you’re a franchisor, make sure default notices are specific, include evidence, and allow the contractually required time to fix the problem. If you’re a franchisee, respond in writing within the timeframe, address each breach, and provide proof of rectification.

When a termination stands or falls on process, precision wins. If you’re joining a network, commissioning an independent Franchise Agreement Review before you sign can surface ambiguous steps or onerous defaults early.

3) Restraints Of Trade Must Be Reasonable

Non‑compete and non‑solicit clauses are common in franchise agreements. Courts will typically enforce restraints that are reasonable in time, geography and scope to protect legitimate interests (brand goodwill, confidential systems, local customer connections). Over‑broad restraints invite challenge.

Franchisors should draft restraints with cascading durations and areas tailored to the territory. Franchisees should understand what they’re agreeing to – and get tailored Restraint Of Trade Advice if unsure about enforceability.

4) Supply Chains, Pricing And Standards Need Transparency

Disputes often arise when franchisees feel they’re paying too much for mandated supplies or when system standards change without consultation. Minimise risk by spelling out approved suppliers, how rebates work, when system changes can be introduced, and the consent process for alternatives.

Be mindful of the Australian Consumer Law (ACL). Representations about costs, performance or exclusivity must be accurate to avoid issues under Section 18 (misleading or deceptive conduct). Clear communication and realistic claims go a long way.

5) Marketing Funds Require Robust Governance (And The Right Audit Settings)

Marketing levies are sensitive. Under the Code, franchisors must maintain a separate marketing fund account and provide an annual financial statement to contributors within the required timeframes. The fund must be audited annually unless a sufficient majority of contributing franchisees vote against an audit for that year (as permitted by the Code).

Set expectations up‑front and report like clockwork. A well‑drafted franchise agreement and disclosure materials should explain contributions, allowable expenditures, and how the budget is set and reviewed. Transparency here builds trust – and reduces disputes.

6) Occupancy And Leases: Align The Documents

Another recurring theme is who controls the lease – franchisor or franchisee – and what happens on transfer, closure or relocation. If the franchisor holds the head lease, make sure the sublease or licence aligns with the franchise term and clearly covers make‑good, handover, and early exit scenarios.

Clarity prevents stalemates (and unexpected costs). If you’re negotiating or updating your occupancy documents, a Commercial Lease Lawyer can help you align lease and franchise obligations neatly.

7) Employment Compliance Isn’t Optional

Even when the franchisor isn’t the direct employer, wage underpayments or rostering breaches at store level create legal and reputational risk for a whole network. Franchisors should set compliance frameworks and audit periodically. Franchisees must ensure correct awards, accurate time records and lawful deductions.

Practical tools matter: up‑to‑date payroll systems, documented rosters and clear policies, plus a compliant Employment Contract for each team member, reduce risk and support fair treatment.

How To Prevent Disputes In Your Franchise Network

1) Lock In Clear, Current Documents

Your franchise documents are your operating system. Ensure your agreement, disclosure and manuals are current, consistent and tailored to Australian law. If it’s been a while since your last update, refresh them – including your disclosure materials and references to marketing funds, approved suppliers and dispute pathways.

Franchisors should also keep their details up to date on the Franchise Disclosure Register. For franchisees, an independent Franchise Agreement Review before you sign can highlight red flags and negotiation points.

2) Be Specific About Performance And Support

State what “good” looks like and how performance will be measured (KPIs, audits, mystery shops). Set out the support the franchisor will provide (training, operational site visits, marketing calendars) and include a realistic improvement plan process for under‑performing sites.

3) Make Changes Gradual – And Document Them

System changes are inevitable. Pilot first, seek feedback, give reasonable lead times and explain the “why”. If costs are involved, consider transitional support. When change feels collaborative and predictable, disputes are less likely.

4) Tighten Marketing Fund Governance

Publish clear rules for the fund’s purpose and how spend is prioritised. Provide annual statements on time, with enough detail for contributors to understand the value to their local sales. Where the Code permits voting against an audit for a given year, ensure that process is run properly and documented.

5) Build A Mediation Mindset

The Code includes a dispute resolution framework that encourages early negotiation and allows either party to refer disputes to mediation or conciliation. While it isn’t a strict bar to litigation, courts expect parties to make genuine attempts to resolve disputes efficiently. A well‑structured Deed of Release and Settlement can then capture the outcome and prevent issues from resurfacing.

What Should You Do If A Franchise Dispute Breaks Out?

Don’t panic – and don’t go silent. A calm, process‑driven approach protects your position and usually leads to faster, better outcomes.

Step 1: Pull The Paperwork

Collect the franchise agreement, disclosure document, any sublease or licence, correspondence (emails, texts), performance reports and manuals. You need these to assess rights and obligations objectively.

Step 2: Identify The Issues And Your Desired Outcome

Is this about performance standards, supply terms, marketing funds, lease terms or exit timing? Define what “resolution” looks like – a cure plan, a payment schedule, a relocation, a clean exit, or something else. Knowing your goal shapes your strategy.

Step 3: Follow The Contractual Process

If you’re alleging breach, issue a compliant notice with particulars and a reasonable time to remedy. If you’ve received a notice, respond within timeframes and include evidence of rectification. Avoid “informal terminations” – they tend to backfire.

Step 4: Use The Code’s ADR Pathway

The Code allows either party to trigger alternative dispute resolution (mediation or conciliation) – typically a quicker, more cost‑effective path than court. Prepare properly: exchange position papers, update financials, and ensure decision‑makers are authorised to settle on the day.

Step 5: Document The Deal Properly

Once you reach agreement, record it in a binding settlement document. Depending on the outcome, that may be a variation, a Deed of Termination, or a Deed of Release and Settlement. Address handover, restraints, inventory, marketing funds and make‑good with clear timelines and responsibilities.

Essential Documents That Strengthen Your Position

Whether you’re building a network or joining one, the right documents – tailored to your model – reduce risk and make disputes rarer and easier to resolve.

• Franchise Agreement: Sets the relationship, territory, fees, standards, dispute process and exit terms. It should map cleanly to your operations and disclosure, including marketing funds and supply rules.
• Disclosure Materials: Accurate, current disclosures (and any updates) ensure candidates can make informed decisions and support compliance with the Code’s timing and content requirements.
• Operations Manual: Day‑to‑day standards (food safety, service, equipment, systems) referenced as binding so compliance can be monitored and enforced.
• Occupancy Documents: Sublease or licence aligned to the franchise term and territory, ideally reviewed by a Commercial Lease Lawyer to tie lease and franchise obligations together.
• Supply Agreements: Clear terms for approved suppliers, pricing, rebates and product standards. Transparency and accurate representations help manage risk under the ACL, including Section 18.
• Employment Contracts And Policies: Ensure award compliance, rostering rules and payroll practices are documented; an Employment Contract for every staff member plus core workplace policies is a practical baseline.
• Exit And Settlement Documents: If you need to part ways, use a Deed of Termination and a well‑drafted settlement deed to finalise obligations, manage inventory and confirm restraints.
• Restraint Framework: Tailored restraints (with cascading time and area) protect the brand without overreaching – get advice to calibrate enforceability.

Considering A Nando’s‑Style Franchise? Due Diligence Tips

If you’re evaluating a quick‑service restaurant franchise (whether Nando’s or another brand), build dispute‑prevention into your due diligence checklist:

• Review historical marketing fund statements and how spend is allocated (brand vs local sales support).
• Ask for store‑level support details: training, launch support, site selection and operational visits.
• Check the lease structure: head lease vs sublease, make‑good exposure and alignment with the franchise term.
• Clarify supply chain terms, logistics, price reviews and any rebate arrangements.
• Model realistic costs for fit‑out, equipment upgrades and system changes over the full term.
• Confirm that key documents provided match what appears on the Franchise Disclosure Register.
• Get an independent Franchise Agreement Review that also checks disclosure, occupancy and restraints.

Spending a little extra time up front is far cheaper than a dispute later on.

Key Takeaways

• Most franchise disputes, including those seen in large networks like Nando’s, revolve around familiar issues: termination processes, restraints, supply chains, marketing funds, leases and employment compliance.
• Acting in good faith, following the agreement to the letter and documenting decisions can make or break your legal position.
• Clarity beats conflict: align franchise agreements, disclosures, manuals, supply terms and occupancy documents so expectations are crystal clear.
• The Code promotes early resolution through mediation or conciliation; while not a hard pre‑condition to court, genuine attempts at ADR save time and money and are looked on favourably.
• Marketing funds require strong governance – separate accounting, timely statements and audit settings that match the Code’s requirements.
• Reasonable, tailored restraints are more likely to be enforceable; overly broad restraints invite challenge, so calibrate them with proper advice.

If you’d like a consultation on franchise disputes or to review your Nando’s‑style Franchise Agreement and documents, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.