Starting a franchise in Australia is an exciting path, whether you’re growing your existing business or buying into an established brand. But franchising comes with strict legal obligations. From business structure to disclosure documents, there are specific legal steps you must follow to stay compliant and set your franchise up for long-term success. So what are the legal steps to starting a franchise in Australia?
In this guide, you’ll find a clear breakdown of the key legal processes, including how to structure your franchise, meet your obligations under the Franchising Code of Conduct and avoid common legal pitfalls. Taking the right steps from the outset can save you from costly setbacks and give your franchise a solid legal foundation.
A Quick Overview: Legal Steps to Starting a Franchise in Australia
Starting a franchise involves more than just a business idea. Key legal steps include:
- Choosing the right business structure
- Developing a compliant franchise agreement
- Creating a detailed disclosure document
- Registering your intellectual property
- Ensuring compliance with the Franchising Code of Conduct
- Obtaining necessary licences and permits
- Providing training and support systems
Each of these steps requires careful legal planning to avoid breaches, penalties or reputational damage.
Step 1: Choose the Right Business Structure
Before launching your franchise, you must determine the best legal structure for your business operations. Options include:
- Sole Trader: Simple but may not offer sufficient asset protection.
- Partnership: Useful if multiple individuals are involved but carries shared liability.
- Company: Offers better asset protection and is often the preferred structure for franchisors.
- Trust: Sometimes used for asset protection and tax benefits.
Consulting a legal professional ensures that the structure aligns with your expansion plans, tax obligations and liability protections.
Step 2: Draft a Legally Compliant Franchise Agreement
The franchise agreement is the cornerstone of any franchise relationship. It outlines the rights, obligations, fees, restrictions and termination clauses for both parties.
A franchise agreement should cover:
- Initial and ongoing fees
- Branding and intellectual property usage rights
- Territory rights and restrictions
- Training and support obligations
- Duration and renewal terms
- Dispute resolution processes
Australian law requires that the agreement clearly sets out these terms in plain language to avoid ambiguity and legal challenges.
Step 3: Prepare a Disclosure Document
Under the Franchising Code of Conduct, franchisors must provide a comprehensive disclosure document to prospective franchisees.
The disclosure document must include:
- Details about the franchisor’s business experience
- Financial reports for the past two years
- Existing franchisees and franchisee turnover rates
- Legal actions involving the franchisor
- Fees, costs and payment obligations
- Marketing and advertising requirements
The document must be given to prospective franchisees at least 14 days before they sign any agreement or pay any money.
Step 4: Protect Your Intellectual Property
Your brand name, logo, slogans and proprietary systems are vital assets. Protecting them ensures your franchise’s value remains secure.
Key actions to consider are:
- Register your trademarks with IP Australia.
- Consider registering patents or designs if applicable.
- Draft confidentiality agreements to protect trade secrets.
Failure to properly protect your intellectual property can expose your franchise system to brand dilution and unauthorised use.
Step 5: Comply with the Franchising Code of Conduct
The Franchising Code of Conduct is a mandatory regulation that all franchisors must follow. The key requirements include:
- Providing a compliant disclosure document
- Acting in good faith in all franchise dealings
- Offering a 14-day cooling-off period after signing
- Implementing dispute resolution procedures
Non-compliance can result in significant penalties and reputational damage. Legal guidance ensures your operations remain compliant at every stage.
Step 6: Obtain Necessary Licences and Permits
Depending on your industry, you may need specific licences, permits or certifications. Some examples are:
- Food handling licences for hospitality franchises
- Building permits for construction-related franchises
- Business registrations at state and federal levels
Failure to secure the necessary approvals can delay operations or expose you to fines.
Step 7: Establish Training and Support Systems
Providing franchisees with comprehensive training and ongoing support is not only good practice. It’s often a legal expectation under the franchise agreement.
Some areas for training to consider are:
- Operational procedures
- Customer service standards
- Marketing and brand guidelines
- Compliance obligations
Clear training manuals, operations handbooks and access to support resources reduce the risk of disputes and ensure brand consistency across franchise locations.
Why Legal Advice is Critical When Starting a Franchise
Franchising can be a complex legal landscape. Missteps at the beginning can lead to costly litigation, regulatory fines or failed franchise relationships.
Working with an experienced franchise lawyer helps you:
- Draft strong and enforceable franchise documents
- Understand your legal obligations under Australian law
- Protect your intellectual property and commercial interests
- Minimise the risk of future disputes
- Navigate compliance with confidence
Final Thoughts
Understanding the legal steps to starting a franchise in Australia is critical to setting up a successful and compliant franchise system. From choosing the right business structure to complying with disclosure obligations and protecting your brand, every step plays a role in safeguarding your investment.
Legal support ensures that your franchise operations are built on a solid foundation, providing peace of mind as you expand your brand.
Need Expert Legal Guidance for Your Franchise?
At Rotstein Commercial Lawyers, we specialise in franchise law and business expansion strategies. Whether you’re setting up your first franchise or expanding your network, our experienced team is ready to guide you through the legal process.
Start your franchise journey with confidence. Call us on +61 3 9604 7888 or visit our Contact Us page to schedule a consultation. Protect your brand and investment with expert legal advice today.
