Whose Name Should Hold A Franchise In Australia?

Buying or starting a franchise can feel like the best of both worlds. You’re building a business of your own, but you’re doing it with a tested model, established systems and (usually) an existing brand presence behind you.

But one thing that’s easy to overlook early on is how you set up your franchise business structure - the legal structure you operate under (and sometimes, the structure of a broader franchise group if you’re expanding).

Your structure affects your personal liability exposure, tax, banking and finance options, how you bring in business partners, and how straightforward it will be to sell, scale or even exit the franchise later. It can also affect how you sign franchise documents and who is actually responsible for the obligations in the franchise agreement.

Below, we’ll walk you through the main options for franchisees in Australia, what to consider before you commit, and the legal documents that help lock in the structure the right way from day one.

What Does “Franchise Business Structure” Actually Mean?

When people talk about a franchise business structure, they’re usually referring to the legal entity that will:

• enter into the franchise agreement with the franchisor
• own the assets of the franchise business (like equipment and stock)
• employ staff (if you hire)
• hold leases, licences and supplier accounts
• earn the income and pay the tax
• carry legal responsibility if something goes wrong

In Australia, the most common structure options for a franchisee are:

• sole trader
• partnership
• company
• trust (often with a company acting as trustee)

There’s no one-size-fits-all answer. The right structure depends on your risk profile, whether you have co-owners, how you’re funding the franchise, and how you want to operate long term.

What Should You Consider Before Choosing Your Franchise Structure?

Before picking a structure, it helps to step back and map out how your franchise will work in practice. A structure that suits a small, owner-operated franchise may not be right if you plan to expand into multiple sites or bring in investors later.

1. Who Is Actually Signing The Franchise Agreement?

This is one of the most important questions to get clear on early. The entity that signs the franchise agreement is usually the entity responsible for:

• paying franchise fees and royalties
• meeting operational standards and KPIs
• maintaining insurance and compliance obligations
• any breaches, disputes or termination risks

In other words, the structure is not just “admin” - it determines who is on the hook.

2. Liability And Asset Protection

Franchises often involve a lease, staff, suppliers, customer claims and ongoing fees. That means risk. One major reason business owners consider a company (or a trust with a corporate trustee) is to help separate business obligations from personal assets.

That said, be aware: many franchisors and landlords ask for personal guarantees, especially for new franchisees, which can significantly reduce the practical protection you might otherwise expect. Directors can also have personal duties and potential liability in some situations, and trustees can be personally liable too (even if they may have rights of indemnity). It’s important to get advice on what protection your structure will (and won’t) give you in your specific setup.

3. Tax, Cash Flow And Profit Distribution

How income flows to you (and any co-owners) matters. Some structures are simpler but less flexible. Others allow more options for distributing profits, retaining earnings for growth, or planning for succession.

Tax outcomes can be complex and very situation-specific, so it’s worth speaking with your accountant early. From a legal perspective, we focus on making sure your structure is properly set up, documented and consistent with your franchise documents.

4. Growth Plans (Multiple Sites, Selling, Bringing In Partners)

Some franchisees start with one location and stay there. Others plan to become multi-site operators. If you may expand, think about:

• will you own multiple locations under one entity, or separate entities for each site?
• do you want to be able to sell one site without selling them all?
• do you want to bring in an investor or co-owner later?

These questions can influence whether a company (or a broader structure like a holding/operating setup) is appropriate.

Common Franchise Business Structures In Australia (And When They Make Sense)

Let’s run through the most common structures franchisees use, with the practical pros and cons from a small business perspective.

Sole Trader

A sole trader structure means you operate the franchise as an individual (under your own name or a registered business name). It’s generally the simplest to start and manage.

When it can work well:

• you’re the only owner
• you’re running a smaller franchise with lower risk
• you want a straightforward setup to get started quickly
• you’re not planning to bring in investors or partners

Key downsides to be aware of:

• you are personally liable for business debts and legal claims
• less flexibility if you later want to sell part of the business or add owners
• some franchisors may prefer franchisees to trade through a company

Even if you start as a sole trader, it’s worth thinking ahead: if you later change structures, you may need the franchisor’s consent and may need to deal with asset transfers, lease assignments and updates to licences.

Partnership

A partnership is where two or more people operate the franchise together. Partnerships can be informal, but that informality is exactly where problems often start if it’s not documented properly.

When it can work well:

• you’re starting a franchise with a spouse, friend or business partner
• you want shared decision-making and shared responsibility
• the business is still fairly small and owner-operated

Key downsides to be aware of:

• partners can be jointly responsible for debts and obligations
• disputes can get messy fast without clear rules
• selling or exiting can be complicated if roles and ownership aren’t clearly set out

If you’re considering a partnership, a Partnership Agreement can be one of the most valuable early investments you make, because it sets the rules for decision-making, profits, what happens if someone wants out, and how disputes are handled.

Company (Pty Ltd)

Many franchisees operate through a proprietary limited company (Pty Ltd). A company is a separate legal entity, which can help manage risk and can make ownership and succession more structured.

When it can work well:

• you want a structure that may limit liability in some circumstances (noting guarantees and director obligations can still create personal exposure)
• you plan to hire staff and grow
• you want clearer separation between business and personal finances
• you may add shareholders later (e.g. family members, business partners, investors)

Key downsides to be aware of:

• more setup and ongoing compliance (ASIC obligations, record-keeping, director duties)
• higher admin costs than a sole trader
• you’ll need the right governance documents in place

If you’re setting up a company, a tailored Company Constitution can help set the internal rules of the company, especially where you have multiple owners or want clear processes for decision-making.

If there will be more than one owner, it’s also worth considering a Shareholders Agreement so everyone is aligned on ownership, roles, what happens if someone wants to exit, and how major decisions are approved.

Trust (Often With A Corporate Trustee)

Some franchisees operate through a trust, often with a company acting as trustee. Trust structures are commonly used for asset protection and tax planning reasons (with accounting advice), particularly for family-run businesses.

When it can work well:

• you want flexibility in distributing profits to beneficiaries (subject to tax advice)
• you’re building a family business and thinking about succession planning
• you want additional asset protection strategies

Key downsides to be aware of:

• can be complex and costly to set up and administer
• some franchisors (and lenders) have strong preferences about who signs the franchise agreement
• you need to ensure the trust deed and related documents align with franchise requirements

Trusts can be powerful, but they need to be set up carefully so the trustee, beneficiaries, and operational control align with the franchisor’s expectations and your funding arrangements. It’s also important to understand that trustees can be personally liable for trust obligations (even where a corporate trustee is used), and the practical risk position can depend on guarantees and the terms of your agreements.

How Your Franchise Structure Affects Key Legal And Commercial Issues

Your franchise business structure doesn’t sit in isolation. It impacts the day-to-day realities of running the franchise, and it can determine how “painful” certain milestones become later (like refinancing, expanding or selling).

Leases And Fit-Outs

If your franchise is in a retail or commercial premises, the lease is a major commitment. You’ll want your lease and your franchise agreement to “match” - for example, making sure:

• the correct entity is the tenant
• your permitted use aligns with the franchise operations
• the term and options work with your franchise term
• assignment and exit rights are practical if you sell

Where you’re negotiating or reviewing a lease, it’s often the structure decision that determines how guarantees are handled and who carries the risk.

Employment And Hiring Staff

If you will employ staff, your structure affects who the legal employer is (and therefore who is responsible for Fair Work compliance, payroll, record-keeping, and workplace policies).

Even for small teams, having an Employment Contract helps set expectations and reduce misunderstandings around duties, rosters, confidentiality and termination.

Customer Complaints And Australian Consumer Law

Franchise businesses often deal with high customer volume. That means you need to be across the Australian Consumer Law (ACL), including rules around misleading or deceptive conduct, refunds, and consumer guarantees.

If your franchise is customer-facing (most are), it’s also worth understanding how your advertising and sales processes can raise ACL issues. This becomes especially important if head office provides marketing that you’re required to use.

Online Orders, Loyalty Programs And Privacy

Many franchises now collect customer data through online ordering, booking systems, Wi-Fi sign-ins, or loyalty programs. If you collect personal information, you may need a Privacy Policy depending on whether your business is covered by the Privacy Act and how the franchisor’s systems handle customer data.

From a structure perspective, it’s also important to be clear about whether customer data is collected by you (as the franchisee) or by the franchisor (or both), and what your obligations are if there’s a data breach.

Franchise Group Structures: What If You Want Multiple Locations?

Once you move beyond a single site, structure becomes even more strategic. Multi-site operators often start thinking about risk separation, management efficiency and how to make growth bankable.

Some common approaches (depending on franchisor approval and accounting advice) include:

• One entity, multiple sites: simpler admin, but liabilities can flow across the whole business
• Separate entity per site: helps quarantine risk between sites, but higher admin and setup costs
• Operating company + holding structure: can support growth and asset separation, but needs careful design

This is also where lenders often scrutinise your documentation, especially around guarantees, cash flow, and who owns what.

If you’re building toward a multi-site portfolio, it’s worth getting advice early rather than “patching” the structure later - because changing structures mid-stream can require franchisor consent, lease assignments, and updated supplier accounts.

What Legal Documents Will Help Protect Your Structure And Reduce Risk?

Choosing the right franchise business structure is a great start - but it’s the documents around it that make it work properly in real life.

Depending on how you’re setting up, consider the following:

• Franchise Agreement Review: the franchise agreement often has strict rules about who can operate, whether you can change your structure, and what approvals you need for transfers or sales.
• Company Constitution: if you’re operating through a company, a tailored Company Constitution can help set out rules for how the company is managed.
• Shareholders Agreement: if you have co-owners, a Shareholders Agreement can cover control, funding, exit rights, and what happens if someone wants to sell or stops working in the business.
• Partnership Agreement: if you’re not incorporating, a Partnership Agreement helps avoid disputes by documenting ownership, profit share, decision-making, and exit processes.
• Employment Contracts: if you’re hiring, an Employment Contract helps set clear expectations and protect your confidential information and systems.
• Privacy Policy: if you collect customer data, you may need a Privacy Policy depending on your legal obligations and the franchisor’s arrangements.

Not every franchise will need every document above, and the best mix depends on how your franchise is structured, whether you have co-owners, and what the franchisor requires. The key is making sure your legal documents match your real-world arrangement - and match what you’re signing up to under the franchise agreement.

Key Takeaways

• Your franchise business structure determines who signs the franchise agreement, who owns assets, who employs staff, and who carries legal responsibility for debts and claims.
• The most common structure options for Australian franchisees are sole trader, partnership, company, and trust - each has different implications for liability, admin, and growth.
• If you’re planning to expand to multiple sites, it’s worth thinking about structure early so you’re not forced into complex changes later (which may require franchisor consent).
• Even the best structure can unravel without the right supporting documents, such as a Company Constitution, Shareholders Agreement, Partnership Agreement, Employment Contracts and (where required) a Privacy Policy.
• Because franchising involves long-term obligations, it’s smart to align your structure decision with your franchise agreement, lease arrangements and financing plans before you commit.

If you’d like a consultation on choosing the right structure for your franchise, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Official Sources to Check

Rules and regulator guidance can change. Check the current official material most relevant to this issue before relying on the article:

• ACCC: Franchising Code of Conduct