Starting a Restaurant Franchise in Australia: Key Legal Steps

Opening a successful restaurant is a huge achievement. Turning it into a restaurant franchise can be the next big step - helping you scale faster, attract investment and build a brand that outlives any single location.

Franchising is powerful, but it’s also highly regulated in Australia. The law expects franchisors to be transparent, fair and organised. With the right preparation and legal foundations, you can expand with confidence.

In this guide, we’ll walk through what a restaurant franchise is, how to assess if it’s right for your business, the key legal steps to set up as a franchisor, and the documents and compliance obligations you’ll need to manage along the way.

What Is A Restaurant Franchise?

A restaurant franchise is a business model where you (the franchisor) grant another person or company (the franchisee) the right to run a restaurant using your brand, systems and support in exchange for fees (like an upfront franchise fee and ongoing royalties).

Typically, you’ll provide your franchisees with a proven menu and operations manual, brand assets, supply arrangements, training and ongoing marketing. In return, they invest their own capital to open and operate locations under your banner, following your standards.

Franchising lets you grow without funding every new site yourself. But it also means you’ll be responsible for a fair and compliant system that treats franchisees properly and protects your brand.

Is A Restaurant Franchise The Right Growth Strategy For You?

Franchising isn’t the only way to scale. You could open corporate-owned sites, partner in joint ventures, or license parts of your IP. Ask a few key questions before you commit:

• Do you have a replicable, documented business model? Franchisees need clear systems, training and support.
• Is your brand distinctive and protectable? Strong trade marks and consistent brand standards are essential.
• Can you support franchisees at scale? Think initial training, supplier arrangements, marketing, audits and ongoing coaching.
• Are your unit economics healthy? A franchise needs room for royalties and fees while still being profitable for franchisees.
• Are you prepared for regulation and reporting? The Franchising Code of Conduct imposes strict disclosure and conduct rules.

If you’re not ready to franchise yet, you can still grow through company-owned expansion while you refine your systems. And if you’re already dealing with “partners” using your brand informally, be careful - that can drift into an arrangement the law will treat as a franchise, so it’s worth getting advice before you risk accidental franchising.

Step-By-Step: How To Set Up A Restaurant Franchise

1) Solidify Your Concept And Operations

Make sure your model is proven across at least one, ideally multiple, locations. Document your kitchen procedures, food safety processes, training, POS and inventory workflows, brand guidelines and local marketing playbook. Consistency is key.

2) Protect Your Brand And Recipes

Secure your brand assets early. Register your core brand name and logo as trade marks so you can license them to franchisees and stop copycats. It’s also smart to lock down key sub-brands or menu item names if they’re distinctive. You can start this process via Register Your Trade Mark.

3) Choose Your Business Structure

Many franchisors operate through a company to separate liability and facilitate licensing of IP to franchisees. You might also use a holding company for IP and a separate entity for franchising operations. If you have co-founders or investors, put a Shareholders Agreement in place to clarify decision-making, equity and exits before you scale.

4) Build Your Franchise System

Design your franchise blueprint: fees and royalties, territory rules, site selection criteria, supplier programs, training, grand opening support, marketing fund arrangements, audit and quality processes, and renewal/exit pathways. Your operations manual should mirror this and be practical for franchisees to implement from day one.

5) Prepare Your Legal Suite

In Australia, franchising is regulated by the Competition and Consumer (Industry Codes-Franchising) Regulation 2014, commonly called the Franchising Code of Conduct. You’ll need a compliant Franchise Agreement, a Key Facts Sheet, and a Franchise Disclosure Document with current, accurate information about your system, fees, disputes and more.

From July 2022, most franchisors must also publish certain information on the government’s public portal; we can help you meet your obligations for the Franchise Disclosure Register.

6) Map Your Compliance Obligations

Beyond franchising law, consider food business licensing, state-based food safety rules, workplace law, privacy and consumer law, plus lease arrangements for sites. Create a compliance calendar (e.g. disclosure updates, marketing fund reporting, IP renewals) so you don’t miss deadlines.

7) Recruit And Onboard Franchisees

Design a fair recruitment process. Qualify candidates for capital, experience and cultural fit. Provide all required disclosure at least 14 days before signing. Give realistic financial information and never pressure signings. A clean process builds trust and reduces disputes.

8) Support, Monitor And Improve

Your success and your franchisees’ success go hand in hand. Provide structured training, regular check-ins, menu updates, marketing campaigns and supply chain support. Monitor performance and quality, and refine your systems based on data and field feedback.

If you’d like help at any stage, working with an experienced Franchise Lawyer can keep your system compliant and franchisee-ready.

What Laws Apply To Restaurant Franchising In Australia?

The Franchising Code Of Conduct

The Code is a mandatory industry code under the Competition and Consumer Act. It sets out how franchisors and franchisees must behave before, during and at the end of the relationship. Key requirements include:

• Good faith obligations on both parties.
• Pre-contract disclosure (Disclosure Document, Key Facts Sheet and information statement to prospective franchisees).
• Cooling-off rights for franchisees.
• Rules for marketing funds, end-of-term handling, restraints of trade and dispute resolution.
• Record-keeping and timing requirements (e.g. disclosure at least 14 days before signing).

Breaches can attract penalties and damage your brand. Keep your materials updated annually and when material facts change.

Australian Consumer Law (ACL)

The Australian Consumer Law applies to your dealings with franchisees and their customers. This covers misleading or deceptive conduct, unfair contract terms, guarantees for goods and services, refunds and advertising rules. If you sell goods or services to consumers or set customer-facing policies for franchisees, it’s wise to align those with the ACL with the help of a Consumer Lawyer.

Employment Law And Workplace Safety

Your franchisees will usually be the legal employers of their staff, but head office policies and guidance can still influence their obligations. Under the Fair Work system, employers must follow modern awards, minimum wages, rostering rules, leave entitlements and safety laws. Provide guidance that supports compliance, and make sure your own head office employees have a clear Employment Contract and policies.

Privacy And Data

If you or your franchisees collect customer details (for bookings, loyalty programs or online orders), you’ll need clear data practices. At a minimum, ensure your head office website and any central CRM has an up-to-date Privacy Policy, and set rules for franchisees to handle personal information securely and consistently with Australian privacy law.

Intellectual Property

Your brand is the heart of your franchise. Register your trade marks and license them properly to franchisees. Control brand usage, menu names, product photography and approved suppliers through your agreement and manual. Keep an eye on third parties who might infringe your IP and act quickly to protect it.

Leasing And Site Control

Restaurants live or die by location. Decide whether head office or the franchisee will hold each lease. If you hold the head lease and grant a sublease or licence, make sure your franchise and lease documents align on fitout, signage, assignment and exit. If the franchisee holds the lease, build strong approval and step-in rights into your franchise documentation.

What Legal Documents Will You Need?

Every franchise system is different, but most restaurant franchisors will rely on a core set of tailored documents. Getting these right from the start can prevent disputes and protect your brand.

• Franchise Agreement: The main contract setting out rights and obligations (fees, territory, term, training, supply, quality standards, audits, default and termination, renewal and exit).
• Franchise Disclosure Document: A detailed disclosure to prospective franchisees, updated annually and when key facts change, plus the mandatory Key Facts Sheet.
• Franchise Disclosure Register: Information many franchisors must publish on the government’s register - keep it accurate and consistent with your disclosure.
• Operations Manual: Practical standards for day-to-day operations, food safety, brand use, suppliers, marketing, reporting and customer service (often referenced in the Franchise Agreement).
• Trade Mark Licence: Usually built into your franchise contract, allowing franchisees to use your registered trade marks under strict rules.
• Privacy Policy & Data Rules: Policies for websites, apps and any central databases, plus data-sharing rules with franchisees.
• Supply And Procurement Agreements: Contracts with key suppliers and provisions in the franchise system to ensure consistent quality and pricing.
• Lease/Sublease Or Licence To Occupy: Site control documents aligned with your franchise terms (fitout, signage, handover and step-in rights).
• Employment Contracts & Policies: Clear head office documents for your team and template guidance for franchisees; start with an Employment Contract and a staff handbook.
• Shareholders Agreement (if you have co-founders): Sets out ownership, roles, decision-making, vesting and exit to keep the leadership aligned as you grow.
• Website Terms: If you take bookings, orders or payments online for the network, publish clear website terms (and ensure franchisee sites mirror your standards).

Not every franchise will need every document in the same form, and some will need additional paperwork (e.g. finance or equipment leasing). A tailored, system-wide approach is best.

Common Pitfalls And How To Avoid Them

Overpromising Financials

Prospective franchisees will always ask, “How much can I make?” Be careful with projections and case studies. The ACL prohibits misleading representations. Stick to accurate, reasonable information, and ensure your disclosure and onboarding conversations match your documents.

Outdated Disclosure

Franchisors must keep disclosure current. If your fees, disputes, suppliers or leadership change, update your documents and give franchisees the latest version. A missed update can undermine trust and expose you to penalties.

Weak Brand Protection

If you don’t register your trade marks and enforce brand standards, you risk inconsistent customer experiences and copycats. Build IP control into your core documents and use audits to keep standards high.

One-Size-Fits-All Agreements

Templates pulled from overseas or another industry can create problems. Restaurant franchising has specific needs: food safety, supply chain control, local marketing, technology integrations, site approvals and leasing nuances. Use an Australian, hospitality-savvy Franchise Lawyer to tailor the suite to your model.

Insufficient Franchisee Support

Great systems fail if franchisees feel unsupported. Invest in onboarding, coaching, marketing assets and technology. Clear expectations plus consistent support reduces disputes and improves performance across the network.

Letting Arrangements Drift

Side deals and “just this once” exceptions create confusion and legal risk. Keep to your documented processes, record approvals and variations in writing, and update your manuals across the network so everyone stays aligned.

Key Takeaways

• Franchising a restaurant lets you scale your brand using other people’s capital - but it comes with strict legal and operational responsibilities.
• Before franchising, ensure your concept is proven, your systems are documented and your brand is protected with registered trade marks.
• The Franchising Code of Conduct requires a compliant Franchise Agreement, a current Franchise Disclosure Document and proper use of the Franchise Disclosure Register.
• You’ll also need to align with the Australian Consumer Law, privacy rules, employment law, food licensing and leasing considerations across the network.
• Core documents include your Franchise Agreement, operations manual, trade mark licensing, Privacy Policy, employment and supply agreements, and (if applicable) a Shareholders Agreement at head office.
• Accurate disclosure, realistic financial information and consistent franchisee support are essential to avoid disputes and build a strong network.
• Getting tailored advice from a Franchise Lawyer early can streamline setup and help you avoid costly mistakes.

If you would like a consultation on starting a restaurant franchise, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.