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Buying a franchise is an exciting opportunity if you’ve always wanted to start your own business.
Of course, setting up a business can be difficult—and it gets even more complicated when it comes to buying a franchise.
This is because there are certain rules that you must comply with.
These rules are also dependent on the franchising network you want to join.
The starting point for buying and selling your own franchise is a Franchise Agreement. Often, this will be given to you by your franchisor. In today’s 2025 environment, it is more important than ever to fully understand every aspect of the agreement before you commit.
Before you sign it, it’s a good idea to have a lawyer review the Franchise Agreement and advise you of the key issues and your rights.
Here are the key things franchisees need to know about a Franchise Agreement.
What Is A Franchise?
A franchise is a type of business structure whereby the owner of a business (the franchisor) licenses others (the franchisee) to use the business’s trade name and operating structure. In 2025, this model continues to thrive, offering a proven framework and support system for budding entrepreneurs across Australia.
What Documents Do I Need As A Franchisee?
If you’re thinking of becoming a franchisee, you will need:
- A Franchise Agreement
- An Operation Manual
- … and other legal documents!
A lawyer will be able to help with most of this, but the most important legal document you’ll need is a Franchise Agreement.
What Is A Franchise Agreement?
A Franchise Agreement is one of the 5 essential documents a franchisor (the person licensing the franchise) needs to give you, the franchisee (the person operating the franchised business).
The Franchise Agreement should outline 4 main things:
- The key terms of the business
- The franchisee’s obligations
- The franchisor’s obligations
- Procedures that will be relevant to the purchaser (the incoming franchisee)
Along with these provisions, the Franchise Agreement will contain clauses that are distinct from a normal Business Sale Agreement.
It’s important to note that no two franchises are the same.
This is because franchisors have the opportunity to structure their franchise differently from other existing franchises.
Therefore, specific clauses are needed to outline the relationship between you and the franchisor in a way that reflects the unique nature of the franchise business you are purchasing.
According to the Franchising Code of Conduct, every franchisor is required to present a Franchise Agreement to any potential franchisee. While the Code does not dictate a precise structure for this agreement, it does ensure that all prospective franchisees receive the necessary information to make an informed decision.
This is why it’s crucial that you have a lawyer review any Franchise Agreement—there might be provisions specific to your situation as a franchisee that could otherwise be overlooked.
What Is An Information Statement?
As a franchisee, it’s required that franchisors provide you with an information statement before you buy into the franchise.
Franchisors must provide this to all prospective franchisees no later than 7 days after an expression of interest is shown, whether that interest is conveyed in person or online.
Usually, an information statement will include key details about the risks associated with franchising, due diligence obligations, and answers to common questions that arise when entering into a Franchise Agreement.
What’s The Difference Between A Franchise Agreement And A Franchise Licence?
You might easily get tripped up when it comes to the difference between a Franchise Agreement and a Franchise Licence.
Generally, a Franchise Licence will authorise you to sell branded products from the franchise.
On the other hand, a Franchise Agreement will allow you to actually set up a franchised business. This means that under a Franchise Agreement, you gain access to all of the company’s intellectual property, assets, suppliers and proprietary know-how.
Franchise Agreements tend to be more comprehensive – and therefore more restrictive to franchisees – than Franchise Licences. If you are bound by a Franchise Agreement, you must abide by all its rules and regulations, as you essentially represent the entire franchisor’s brand.
Knowing the difference between a Franchise Agreement and a Franchise Licence is crucial, as the obligations and operational expectations under each can vary significantly.
What Are The Main Franchise Agreement Provisions?
As a potential franchisee, there are certain key elements you should look for in a Franchise Agreement:
Training and Support
The franchisor should provide you with comprehensive training and ongoing support for you and your staff. In 2025, many franchisors have enhanced their offerings with digital training platforms and ongoing technical support.
Geographical Location & Exclusivity
Your Franchise Agreement should clearly define the premises or region where you are authorised to operate. In some cases, this may include an exclusivity clause to prevent other franchisees from operating in the same area.
Duration
Another critical provision is the duration of your Franchise Agreement. The term of the agreement will impact your long-term planning and operational sustainability.
Fees
The agreement should detail all relevant fees, including the initial franchise fee for accessing the franchisor’s brand and system, as well as ongoing royalty payments.
Renewal & Sale Rights
Renewal and sale rights clauses outline your options for terminating or renewing the agreement, and may also include provisions that allow you to sell your franchise if needed.
Some franchisors also include terms that allow for the transfer or sale of the franchise, which can be useful if you ever decide to exit the business.
What If I Want To End My Franchise Agreement?
If you don’t want to sell your franchise – or if you wish to end your Franchise Agreement before the agreed term – it is wise to ensure that a termination clause is included.
A termination clause is critical if either party breaches the terms of the agreement. Most termination clauses provide for two outcomes:
- Suspension: The agreement is temporarily halted until both parties resolve the issue and agree on a resumption date.
- Termination: The agreement is permanently ended.
Including a robust termination clause protects both franchisor and franchisee, providing a structured exit strategy should disputes arise.
In the dynamic franchising landscape of 2025, digital innovation and sustainability are key focus areas. Modern franchisors are increasingly updating their operational systems to include advanced technology, online training modules, and eco-friendly business practices. As you review your Franchise Agreement, ensure it reflects these contemporary standards and clearly outlines support in areas such as data privacy and digital marketing. For further insights, our Franchise Agreement Review service offers detailed advice on aligning your contract with current market practices.
What To Take Away…
As a franchisee, the process of buying and selling a franchise can be complex. Franchising laws are dense and ever-evolving, which is why expert legal advice is essential.
We offer a range of resources to assist you at every stage of the process, including guides on Selling A Franchise, managing the End Of A Franchise, understanding the Legal Documents You Need For Franchising, and deciphering the finer details of Franchise Agreements.
Other valuable resources include guidance on What Fees The Franchisee Has To Pay, tips for Terminating A Franchise Agreement, advice on What To Do With A Bad Franchisee, and understanding Franchisees’ Legal Obligations. It’s also crucial to understand how franchising royalties operate, as detailed in our article on What Are Franchising Royalties, and to familiarise yourself with the Franchise Grant Process.
It’s important to seek advice from an experienced lawyer who can guide you through the process and ensure your Franchise Agreement includes all the necessary provisions for a smooth and successful transaction.
If it’s your first time buying into a franchise, speaking with a lawyer can help you understand how the process works and ensure that your interests are protected every step of the way.
If you’re considering selling your franchise or are interested in purchasing one, don’t hesitate to give our team a call on 1800 730 617 or email us at team@sprintlaw.com.au for a free consult.
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