Reasonable opportunity to make a return

What it means

When you buy a franchise you commit significant capital, the initial fee, fit-out, equipment and working capital. The Code reflects the principle that the agreement's term and terms should give you a fair chance to recoup and profit from that outlay.

It connects to other Code protections: limits on early termination, renewal rights, and compensation where a franchisor withdraws from the market. Together they guard against a structure where a franchisee sinks capital in but is cut off before they can earn it back.

In practice

Weigh the agreement term against your payback period. If the fit-out costs $300,000 and typically takes four years to recoup, a three-year term with uncertain renewal does not give a reasonable opportunity to make a return, a point to raise before signing.

A real example

A gym franchisee facing a large equipment fit-out negotiates a longer initial term after her adviser notes the short term offered would not give a reasonable opportunity to make a return on the investment required.

Reasonable opportunity to make a return, FAQs