Termination

What it means

The Code closely regulates how and when a franchise agreement can be ended so that a franchisee is not cut off arbitrarily. If a franchisor wants to terminate because the franchisee has breached the agreement, it must give written notice of the breach, allow a reasonable time to fix it (generally up to 30 days), and state what is required; if the franchisee remedies the breach, the franchisor cannot terminate for that breach.

The Code also lists special circumstances in which a franchisor may terminate on seven days' notice without allowing time to remedy, such as the franchisee becoming insolvent, abandoning the business, acting fraudulently, endangering public health or safety, or losing a required licence. The 2025 Code expanded these grounds to include certain serious breaches of the Fair Work Act and the Migration Act.

Where a franchisor proposes to terminate in circumstances not covered by an agreement breach or the special grounds, it must give notice and the franchisee has a window to dispute the proposed termination through the Code's dispute-resolution process. Termination interacts with cooling-off (which lets a franchisee exit early) and with post-term obligations such as restraint of trade and handing back the system.

In practice

For a franchisee facing a termination notice, the critical questions are which ground the franchisor relies on and whether they have been given a proper chance to remedy. A vague or immediate termination for an ordinary breach, without notice and time to fix, is unlikely to comply with the Code. Franchisees should respond in writing, remedy what they can, and consider lodging a dispute if they believe the process was not followed.

For a franchisor, following the correct steps is essential because wrongful termination can breach the Code and expose it to penalties and damages. That means documenting the breach, the notice, and the opportunity to remedy, and reserving seven-day termination for the genuinely qualifying special circumstances.

A real example

A franchisor discovers a franchisee has fallen behind on royalty payments. Rather than terminating immediately, the Code requires it to send a written breach notice specifying the arrears and giving a reasonable period, up to 30 days, to pay. The franchisee clears the debt within that period, so the franchisor cannot terminate for that breach. Had the franchisee instead become insolvent, the franchisor could have terminated on seven days' notice under the special circumstances.

Termination — FAQs