From fast food to gyms to real estate agents, many of the businesses you use every day are franchises. Here’s how franchising works, what it costs to buy in, and why it’s not always the safe bet it seems.
Franchising is a way of running a business where one company, the franchisor, lets other people, franchisees, run outlets using its brand, products and business system.
Australia has more than 1,000 franchise systems, and franchising is particularly common in fast food, cafes, convenience stores, gyms, real estate, cleaning, car servicing and retail.
How it works
A franchisee usually pays an upfront fee to join the system, then buys or leases the premises and equipment, and pays ongoing fees.
Ongoing fees typically include royalties, usually a percentage of sales, and a marketing levy that funds national advertising.
In return, the franchisee gets the right to use the brand, training, support, systems and supply arrangements, and often an exclusive territory.
The franchisor usually sets detailed rules about how the business must be run, such as products, prices, store design and suppliers.
The benefits
Buying a franchise can reduce some of the risks of starting a business from scratch. Franchisees get a recognised brand, a tested business model, training and support, and the buying power of a larger network.
Franchisors can grow quickly without having to fund every new outlet themselves.
The risks
A franchise isn’t a guaranteed success. Franchisees can still lose money if sales are weak or costs rise, and they usually have limited control over decisions such as pricing, suppliers and marketing.
They depend heavily on the franchisor. If the brand suffers bad publicity or the franchisor collapses, franchisees can be badly affected.
Disputes are common over issues such as fees, how marketing funds are spent, territories, and what happens when the agreement ends.
The rules
Franchising in Australia is regulated by the Franchising Code of Conduct, a mandatory code under consumer law, enforced by the Australian Competition and Consumer Commission.
Franchisors must give potential franchisees a disclosure document with key information about the business, its finances and any legal disputes, as well as a copy of the agreement, before they sign. There’s a cooling-off period after signing.
A new code took effect in April 2025, with higher penalties and other changes.
Scandals and reform
Franchising has faced scrutiny over cases where franchisees struggled to make money, or where workers were underpaid.
The 7-Eleven wage scandal, exposed in 2015, revealed widespread underpayment of workers in its franchised stores. Laws were later changed so franchisors can be held responsible for underpayment in their networks in some circumstances.
Anyone considering buying a franchise is advised to get independent legal and financial advice, and talk to current and former franchisees.
