Cooling-off period

What it means

The cooling-off period gives a franchisee a genuine chance to change their mind after committing, without losing everything they have paid. If the franchisee terminates within the 14 days, the franchisor must repay all money paid under the agreement, though it may deduct its reasonable expenses if the agreement sets those out. The 2025 Code extended the period from 7 to 14 days and clarified when the clock starts.

The 14 days run from entering into the agreement. The cooling-off right is separate from, and additional to, the 14-day consideration period that must pass before signing. It does not apply to renewals or extensions; on a transfer, the incoming buyer has a separate right to unwind the deal before 14 days pass or before taking control of the business, whichever is earlier.

From 1 November 2025, in limited circumstances a franchisee can give written notice to opt out of the cooling-off period. This generally applies where the franchisee recently held a substantially similar agreement with the same franchisor for the same or a substantially similar business, so the protection is less necessary. Absent a valid opt-out, the right cannot be removed by the agreement.

In practice

In practice the cooling-off period is a franchisee's last low-cost exit before being fully committed. It is a good time to finalise finance, confirm the lease, and complete any remaining due diligence, because withdrawing now costs only the franchisor's reasonable expenses rather than the whole investment. To exercise it, the franchisee should give clear written notice within the 14 days and keep a record.

Franchisors typically structure deposits and start-up steps around these periods, and should avoid pressuring a franchisee to waive or shorten the window, which would breach the Code. A franchisee unsure whether a payment or a signing has started the clock should get advice quickly, since the deadline is strict.

A real example

A franchisee signs a bakery franchise agreement and pays a $30,000 upfront fee on 5 May. Ten days later their bank declines the equipment finance they were relying on. Because they are still inside the 14-day cooling-off period, they give the franchisor written notice of termination on 15 May and recover the $30,000 less the franchisor's documented reasonable costs.

Cooling-off period, FAQs