Termination compensation
What it means
The Code recognises that a franchisee who has invested capital can be unfairly harmed if the franchisor simply exits. Where a franchisor terminates agreements early because it is leaving the market or restructuring its network, the Code provides for compensation to affected franchisees.
This is distinct from termination for a franchisee's own breach. It targets the situation where the franchisor's own strategic decision cuts the franchisee off before they have had a fair chance to earn a return.
In practice
Read the termination and compensation clauses before signing, and understand what happens if the franchisor withdraws. The Code sets a baseline, but the agreement should spell out how compensation is calculated.
A real example
When an overseas burger brand exits Australia and terminates all local agreements, its franchisees rely on the Code's market-withdrawal compensation provisions to recover value for their unexpired terms and investments.
Termination compensation, FAQs
Do I get compensation if the franchisor shuts down?
The Code provides for compensation where a franchisor ends agreements early due to market withdrawal or network rationalisation. The agreement should set out how it is calculated, get advice on your specific situation.
Is compensation payable if I am terminated for breach?
No. Termination compensation under these provisions covers franchisor-driven exits, not termination caused by a franchisee's own breach of the agreement.
See the full franchise glossary, the Fee Index or our buyer guides.