A franchise agreement is a legally binding contract that outlines the rights and obligations of both the franchisor and the franchisee.
Because franchise law in Australia is highly regulated and frequently updated, navigating these agreements without legal help can be risky.
In this article, our franchising lawyers explore how we can assist with franchise agreements, and highlights two important Australian court cases that demonstrate the importance of following franchise rules, obtaining consent, and maintaining accurate documentation.
Key Takeaways
Franchise agreements must comply with the Franchising Code of Conduct and Australian Consumer Law.
A franchise lawyer ensures transparency, prevents disputes and protects both parties’ commercial interests.
Court cases like Civic Video and Guirguis highlight the consequences of breaching franchise obligations.
Accurate documentation and disclosure are essential for managing legal risk.
Both franchisors and franchisees should seek independent legal advice before signing.
What is a Franchise Agreement?
A franchise agreement is the legally binding contract between a franchisor and franchisee that sets out how the business will operate.
It defines rights and obligations. For example, the use of brand/trademark, territory, systems, fees and support. In Australia, such agreements must comply with the Franchising Code of Conduct by the Australian Competition & Consumer Commission.
For a deeper explanation of the concept and required components of a franchise agreement, see: What is a Franchise Agreement?
How a Lawyer Helps With Franchise Agreements
1. Tailoring the Agreement to Your Business Needs
A franchise lawyer ensures that the agreement is customised to reflect the specific commercial arrangements between the franchisor and franchisee.
This includes:
Territory and exclusivity
Marketing obligations
Renewal and termination rights
Supply arrangements
Operational requirements
A customised agreement helps avoid ambiguity and future disagreements.
2. Ensuring Compliance With Franchise Law
Franchise law frequently changes, particularly the Franchising Code of Conduct. Franchise lawyers:
Monitor regulatory updates
Ensure disclosure documents and agreements comply
Protect clients from breaching statutory obligations
Reduce the risk of penalties and legal action
Compliance protects both the business and the franchise relationship.
To stay compliant with current regulations, franchisors and franchisees should also review our latest article on 2025 updates to the Franchising Code of Conduct.
3. Resolving Disputes and Managing Conflict
If disputes arise, a lawyer can guide parties through:
Negotiation
Mediation
Commercial resolution
Litigation (if necessary)
Legal support ensures disputes are handled professionally while protecting commercial interests.
4. Identifying Risks and Preventing Surprises
A franchise lawyer reviews the agreement thoroughly to uncover:
Hidden fees
Financial risks
Operational restrictions
Ambiguous clauses
This helps both parties fully understand their obligations and avoid costly misunderstandings.
5. Clarifying Financial Obligations
Fees and financial commitments in franchise agreements can be extensive, including:
Initial franchise fees
Marketing fund contributions
Costs for training or equipment
Penalty or exit fees
A lawyer ensures all financial responsibilities are transparent and understood before signing.
Key Australian Franchise Law Cases
The Civic Video case was about a franchisee trying to sell its businesses without asking the franchisor’s permission, which led to stopping of operations.
The Court said this was breaking the franchise agreements. The Appeal Court ruled that the franchisor is entitled to compensation. This compensation is for the money they would have earned. This is if the franchisee had continued with the agreement.
It’s crucial for franchisors and franchisees to obey the agreement’s rules and seek approval before making significant changes.
Key Learning Points from the Civic Video Case:
- Enforcement of contractual obligations – Franchisors are entitled to enforce the contractual obligations of franchisees, including the payment of fees due under the franchise agreement.
- Damages for Unlawful Termination – Franchisors may seek damages equal to the amount they would have received had the franchisee performed the agreement for the full term.
- Compliance is crucial – Failure to comply with the franchise agreement terms can have serious consequences. This emphasises the importance of obtaining prior consent for any proposed business transfer.
In simple terms, the Civic Video case teaches us that both franchisors and franchisees must stick to the terms of the agreement and get permission before making any big changes to the business.
In Guirguis and Michel’s Patisserie, a former franchisee claimed that the franchisor had misled them. The franchisee tried to terminate the agreement early by claiming that they had abandoned it, but the franchisor terminated it for the same reason. The court ruled in favour of the franchisor, and pointed out the importance of a document called the “Deed of Prior Representations and Questionnaire. This document was crucial in deciding the franchisee’s claims.
The case shows why franchisees must trust specific statements to support their complaints. It also highlights the importance of effective risk management for franchisors.
Key Learning Points from the Guirguis and Michel’s Patisserie case:
- Misrepresentation claims – To succeed in a misrepresentation claim, a franchisee must prove that it relied on certain representations made at the time the franchise agreement was entered into.
- Document Importance – Thorough risk management practises, including the use of documents like the Deed of Prior Representations and Questionnaire, can help in the defence of future claims.
- Accuracy in Promises – Franchisors should pay attention to the accuracy of promises and representations made to franchisees.
- Warranties and Disclaimers – Including appropriate warranties and disclaimers in franchise documentation can minimise risk and replace any reliance on representations.
- Encourage independent advice – Franchisors should actively encourage franchisees to seek independent advice and conduct extensive research before entering into a franchise agreement.
The Guirguis and Michel’s Patisserie case demonstrates that franchisees must prove they were deceived to make a successful claim. Franchisors should utilise documents to safeguard themselves and ensure franchisees possess all essential information. Franchisors should use documents to protect themselves and ensure franchisees have all the necessary information.
A lawyer ensures the agreement complies with Australian law, protects your commercial interests, clarifies risks, and prevents disputes later.
Yes. Most franchise agreements require franchisor approval before a transfer. Courts uphold this right as seen in the Civic Video case.
Franchisors must provide:
Disclosure Document
Franchise Agreement
Key Facts Sheet
Franchising Code of Conduct information
Financial statements for marketing funds (if applicable)
Learn more about the disclosure and documents requirements on the ACCC’s website.
The franchisor may issue breach notices, seek damages, terminate the agreement or take legal action.
Sometimes (depending on the franchise system). A lawyer can help negotiate or clarify these terms before you commit.
About the Author
Farrah Motley
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