Franchise glossary
Plain-English definitions of the terms, fees and acronyms used in Australian franchising, aligned with the Franchising Code of Conduct 2025 and the ACCC Franchise Disclosure Register. 136 terms and counting.
136 terms
A
ACCC
The Australian Competition and Consumer Commission (ACCC) is the national regulator that administers and enforces the Franchising Code of Conduct alongside the Competition and Consumer Act 2010.
ANZSIC classification
The Australian and New Zealand Standard Industrial Classification code that identifies a business's industry, used on the Franchise Disclosure Register to categorise franchisors.
Arbitration
A dispute-resolution process where an independent arbitrator hears both sides and makes a binding decision. Under the Code it applies where both parties agree to it.
Area developer
An area developer is a franchisee that commits, under a development agreement, to open and operate an agreed number of outlets within a defined territory over a set schedule.
Area representative
A party paid to help recruit and support franchisees in a region on the franchisor's behalf, without becoming the franchisor to those franchisees.
Audit fee
A fee some franchise agreements require the franchisee to pay if the franchisor audits the outlet's sales or records, often triggered when an audit finds under-reporting.
Australian Consumer Law (ACL)
The national consumer-protection law that applies to franchising alongside the Code, covering misleading conduct, unconscionable conduct and unfair contract terms.
Australian Franchise Fee Index
The Australian Franchise Fee Index is FranchiseScope's quarterly benchmark of verified franchise fees, such as upfront fees, royalties and marketing levies, drawn from published disclosure documents so prospective franchisees can see how a brand's costs compare across the sector.
Australian Small Business and Family Enterprise Ombudsman (ASBFEO)
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) is a federal body that assists small businesses, including franchisees, with disputes, helping the parties toward mediation or conciliation, and advocates on small-business and franchising policy.
Average unit volume (AUV)
The average annual sales of a single outlet across a franchise network, a key benchmark for estimating what one outlet might turn over.
B
Brand standards
The rules and specifications every outlet must follow, presentation, products, service and processes, so customers get a consistent experience across the network.
Break-even point
The break-even point is the level of sales at which a franchise's total revenue exactly covers its total costs, so the business makes neither a profit nor a loss, the sales threshold every new outlet must reach before it starts earning.
Business valuation
An estimate of what a franchised business is worth, used when buying or selling a resale, often based on a multiple of adjusted earnings (EBITDA).
C
Capital adequacy
Whether a franchisee has enough capital, up-front funds plus a working-capital buffer, to open and sustain the business through to profitability.
Cash-flow forecast
A month-by-month projection of money coming into and out of a franchise, used to check the business can pay its bills through the ramp-up.
Catchment area
A catchment area is the geographic zone around a site whose population is considered its potential market, used to estimate how many people a location could realistically serve.
Change of ownership (of a franchise system)
When the ownership of a franchisor or franchise system changes hands, triggering disclosure and good-faith obligations toward existing franchisees.
Churn
Churn is the rate at which franchisees leave a network through closures, terminations or transfers, and is a key indicator of how stable and healthy a franchise system is.
Civil penalty
A financial penalty a court can impose on a franchisor for breaching the Franchising Code, sought by the ACCC. It is what gives the Code its enforcement teeth.
Collective bargaining (by franchisees)
Where franchisees join together to negotiate as a group with their franchisor, for example on pricing or terms, which can be permitted under ACCC arrangements.
Competition and Consumer Act 2010
The federal Act that houses both the Australian Consumer Law and the Franchising Code, and that the ACCC enforces.
Conciliation
A dispute-resolution process where an independent conciliator helps the parties reach agreement and can suggest possible solutions, a more active role than a mediator.
Confidentiality clause
A term requiring the franchisee to keep the franchisor's confidential information, systems, recipes, data, private, during and after the agreement.
Consideration period
The consideration period is the mandatory minimum of 14 days that must pass after a prospective franchisee receives the disclosure document, a copy of the Franchising Code and the agreement in the form it will be signed, before the franchisor can sign the agreement.
Conversion franchise
When an existing independent business rebrands and joins a franchise system, converting into a franchised outlet.
Cooling-off period
The cooling-off period is a 14-day window after a franchisee enters into a new franchise agreement during which they can terminate it and recover their payments, less any reasonable expenses the agreement sets out.
Cooling-off waiver
A limited ability, under recent Code changes, for a new franchisee to waive the 14-day cooling-off period if defined conditions are met.
D
Disclosure document
A disclosure document is the standardised information document a franchisor must give a prospective or renewing franchisee at least 14 days before signing, setting out the material facts about the franchise system so the franchisee can make an informed decision.
Discovery day
A discovery day is a meeting, usually at the franchisor's head office, where a prospective franchisee and the franchisor get to know each other, review the business model, and assess mutual fit before proceeding toward an agreement.
Dispute resolution
Dispute resolution is the structured process the Franchising Code of Conduct requires franchisors and franchisees to follow to try to settle a disagreement before going to court.
Drive-time isochrone
A drive-time isochrone is a boundary drawn on a map that joins all the points reachable from a location within a set travel time by car, such as a 10-minute drive, following the actual road network.
Due diligence
Due diligence is the careful investigation a prospective franchisee undertakes before buying, checking the franchisor, the network, the financials, and the agreement so they fully understand the opportunity and its risks.
E
Earnings claim
An earnings claim is any representation by a franchisor about the revenue, profit, sales, or financial performance a franchisee might expect, whether given verbally, in marketing, or in the disclosure document.
EBITDA
EBITDA is earnings before interest, tax, depreciation and amortisation, a measure of a business's operating profit that is widely used to value a franchise unit when it is bought or sold.
Encroachment
Encroachment occurs when a franchisor, another franchisee, or a franchisor-controlled channel takes sales from a franchisee's area or customers, for example by opening a nearby outlet or selling online into the territory.
Establishment cost
Establishment cost is the total capital needed to get a franchise outlet open and trading, including the initial franchise fee, fit-out, equipment, signage, initial stock and setup, but before the working capital needed to run it afterwards.
Exclusive territory
An exclusive territory is a franchise territory in which the franchisor agrees not to operate the franchised business itself or appoint other franchisees, giving the franchisee sole rights to trade under the brand within that area.
F
Fair Work Act (and franchisor liability)
Australia's workplace-relations law. In franchising it can make a franchisor liable for a franchisee's breaches of workplace laws where the franchisor knew or should have known.
Fee holiday
A period, usually at the start, during which a franchisor reduces or waives royalties or other fees to help a new outlet establish.
Field support manager
A franchisor employee who visits and supports franchisees in the field, coaching on operations, standards and performance. Also called a business development manager.
Fit-out
Fit-out is the work and cost of building a premises to the franchisor's brand and operational specifications, including construction, joinery, flooring, lighting, signage and fixtures, and it is usually one of the largest single items in a franchisee's establishment cost.
Franchise advisory council
A franchise advisory council (FAC) is a representative group of franchisees that meets with the franchisor to give feedback on decisions affecting the network, marketing, suppliers, systems and pricing, providing a structured voice for franchisees, usually in an advisory rather than a decision-making role.
Franchise agreement
A franchise agreement is the legally binding contract under which a franchisor grants a franchisee the right to operate a business using the franchisor's brand, systems and intellectual property in return for fees, and which is regulated in Australia by the Franchising Code of Conduct.
Franchise broker
A franchise broker (or franchise consultant) is an intermediary who helps match prospective buyers with franchise systems, usually paid a commission or referral fee by the franchisor when a sale completes, which is why their recommendations should be treated as leads to investigate, not independent advice.
Franchise consultant
An adviser who helps either a business franchise itself, or a buyer choose a franchise. Their independence and fee model should always be checked.
Franchise Council of Australia (FCA)
The peak industry body for the Australian franchise sector, representing franchisors, franchisees and service providers, with a voluntary code of ethics.
Franchise Disclosure Register
The Franchise Disclosure Register is a free public register administered by the ACCC on which franchisors operating in Australia must list key information about their franchise, helping prospective franchisees research and compare systems.
Franchise expo
A trade exhibition where many franchisors showcase their systems to prospective franchisees in one place. Useful for research, but a sales environment.
Franchise finance
The funding used to buy a franchise, typically a deposit of your own capital plus a bank or specialist loan secured against property or business assets.
Franchise lifecycle
The stages a franchisee moves through, from researching and signing, to ramp-up, steady operation, renewal, and eventually exit or resale.
Franchise matching
A service that suggests franchises to a buyer based on their budget, location, skills and goals, sometimes paid by franchisors, so check independence.
Franchise sector statistics
Aggregate data describing the Australian franchise sector, its size, number of systems and outlets, employment and turnover, used to benchmark and contextualise decisions.
Franchise term
The length of time a franchise agreement runs before it ends or must be renewed, commonly five to seven years.
Franchisee
A franchisee is the party granted the right to operate a business under a franchisor's brand and system, in return for fees and compliance with the franchise agreement.
Franchisee satisfaction
A measure of how content franchisees are with a system, often surveyed. High satisfaction and low churn are strong signals of a healthy network.
Franchisee validation
Franchisee validation is the process of contacting current and former franchisees in a network to hear directly about their real experience of costs, support, profitability, and the franchisor relationship before you buy.
Franchising Code of Conduct
The Franchising Code of Conduct is Australia's mandatory industry code, made under the Competition and Consumer Act, that governs the conduct of franchisors and franchisees and imposes binding obligations on disclosure, good faith, cooling-off, dispute resolution and termination.
Franchising Code review
The periodic government review of the Franchising Code, which has driven recent reforms such as stronger penalties and the disclosure register.
Franchisor
A franchisor is the party that owns a business system and brand and grants another party (the franchisee) the right to operate under that system, usually in return for fees and ongoing royalties.
Franchisor insolvency
When a franchisor cannot pay its debts and enters administration or liquidation, one of the most serious risks a franchisee faces.
Franchisor references
The current and former franchisees whose contacts a franchisor must disclose, so a buyer can hear about the system first-hand.
G
Good faith obligation
The good faith obligation is the Franchising Code's mandatory requirement that franchisors and franchisees act honestly, cooperatively and with due regard to each other's legitimate interests throughout every stage of the franchise relationship, including negotiation and dispute resolution.
Goodwill
The value of an established business beyond its physical assets, its customer base, reputation and trading history, reflected in the price of a franchise resale.
Grant of franchise
The act by which a franchisor formally awards a franchisee the right to operate under the system, on the terms of the franchise agreement.
Greenfield
A greenfield is a brand-new franchised outlet opened at a fresh site with no prior trading history, as opposed to buying an existing outlet through a resale.
Gross margin
Gross margin is the percentage of sales revenue left after the direct cost of goods sold, before fixed overheads like rent, wages and franchise fees, a core measure of how much each sale contributes toward covering a franchise's running costs and profit.
Gross sales
Gross sales is the total revenue an outlet takes over a period before deducting any costs, and it is the figure most Australian franchise agreements use as the base for calculating percentage royalties and marketing levies.
Guarantee and indemnity
A document, often signed by a franchisee's directors personally, promising to meet the franchise entity's obligations and cover the franchisor's losses if it defaults.
I
Indemnity
A contractual promise to compensate the other party for specified losses. Franchise agreements often require the franchisee to indemnify the franchisor.
Information Statement
A short, standard document a franchisor must give a prospective franchisee before anything else, setting out in plain language the risks and rewards of buying a franchise.
Initial franchise fee
The initial franchise fee is the one-off, upfront amount a franchisee pays the franchisor for the right to join the network and open an outlet, covering the licence to the brand and system plus initial training and onboarding.
Intellectual property licence
An intellectual property licence is the grant within a franchise agreement that lets the franchisee use the franchisor's brand assets, trade marks, trade name, logos, systems, recipes, software and know-how, for the term of the agreement, without transferring ownership of those assets.
Item 6 network history
Item 6 of the Australian disclosure document is the section that sets out the franchise network's history, including current franchisees and the outlets opened, closed, transferred or terminated over recent financial years.
K
Key Facts Sheet
The Key Facts Sheet was a short, standardised summary that franchisors had to give prospective franchisees under the previous Franchising Code. It was abolished when the current Code commenced on 1 April 2025, so it is no longer part of the disclosure process.
L
Liquid capital
The cash and readily accessible funds a prospective franchisee has available, distinct from total net worth. Franchisors and lenders often set a minimum.
Local area marketing (LAM)
Marketing a franchisee does, and often must spend on, for their own outlet and territory, separate from the national marketing fund.
M
Management franchise
A franchise where the owner manages staff and the business rather than performing the front-line work themselves, often a higher-investment, semi-passive model.
Marketing fund
A marketing fund (or advertising fund) is the pooled account into which franchisees pay their marketing levy, which the franchisor administers to fund network-wide advertising and brand-building, and which the Franchising Code requires to be kept in a separate account with an annual financial statement.
Marketing levy
A marketing levy is a recurring contribution franchisees pay into a pooled fund the franchisor uses for network-wide advertising and brand marketing, separate from the royalty and from any local marketing a franchisee does itself.
Master franchise
A master franchise is an arrangement where a franchisor grants one party (the master franchisee) the right to sub-franchise the system to others within a defined territory or country, effectively acting as a franchisor in that region.
Materially relevant facts
Materially relevant facts are significant matters, such as litigation, insolvency or changes in ownership, that a franchisor must disclose to a prospective or current franchisee, and must update promptly rather than waiting for the next annual disclosure cycle.
Mediation
Mediation is a confidential, without-prejudice process in which an independent, accredited mediator helps a franchisor and franchisee negotiate their own settlement, without the mediator deciding who is right.
Minimum performance criteria
Sales or performance targets a franchisee must meet under the agreement, which can affect renewal, territory rights or even termination.
Misleading or deceptive conduct
Conduct likely to mislead or deceive, prohibited by the Australian Consumer Law. In franchising it often concerns representations made during the sales process.
Multi-brand franchising
Owning franchises of two or more different brands, often complementary, to diversify income and share resources across outlets.
Multi-unit franchisee
A multi-unit franchisee is a single franchisee that owns and operates more than one outlet of the same franchise brand, rather than running just one location.
Mystery shopping
Where a franchisor uses anonymous visitors posing as customers to check that outlets meet brand and service standards.
N
Net-worth requirement
The minimum total assets-minus-liabilities, and often a minimum liquid-capital figure, that a franchisor or lender requires a prospective franchisee to hold.
Network
A franchise network is the whole group of outlets operating under a single brand and system, including franchised units and any outlets the franchisor owns and runs directly.
Non-exclusive territory
A territory where the franchisor may open other outlets or appoint other franchisees, unlike an exclusive territory that is protected.
Notice of dispute
A written notice that formally starts the dispute-resolution process under the Franchising Code, setting out the nature of the dispute and the outcome sought.
Novation
Replacing one party to a contract with another, with all parties' consent, so the new party takes over the rights and obligations, common when a franchise is sold.
O
Ongoing fees
Ongoing fees are the recurring payments a franchisee makes to the franchisor throughout the term of the agreement, most commonly the royalty and the marketing levy, plus any other periodic charges for services, systems or supplies.
Online sales rights
The terms governing who can sell to customers in a territory online, and whether e-commerce sales into your area are credited to you.
Operations manual
An operations manual is the franchisor's confidential handbook of systems, standards and procedures that a franchisee must follow to run the business, and which the franchise agreement incorporates by reference so that the manual is contractually binding even though it can be updated over time.
P
Payback period
Payback period is the time it takes for a franchise outlet's cumulative profit or cash flow to recover the total investment made to open it, giving a simple measure of how long a franchisee's capital is at risk before it is recouped.
Personal guarantee
A personal guarantee is a promise, usually signed by a franchisee's directors or owners, to be personally liable for the franchise company's obligations if the company cannot meet them, meaning personal assets can be at risk even when the franchise is run through a company.
Pilot outlet
A trial outlet a business runs to prove its model works and is replicable before franchising it to others.
R
Ramp-up period
The early months of a new franchise, before it reaches steady, profitable trading, when costs are full but sales are still building.
Reasonable opportunity to make a return
A principle in the Franchising Code that a franchise agreement should give the franchisee a reasonable opportunity to make a return on the investment they are required to make.
Rebates
Rebates are payments or discounts a franchisor receives from suppliers based on the purchasing volume of its franchise network, and Australian franchisors must disclose whether they receive them and whether any benefit is shared with franchisees.
Related agreement
A separate contract you must sign alongside the franchise agreement, most commonly a lease or a supply agreement, that is essential to operating the franchise.
Relocation clause
A term dealing with whether and how a franchised outlet can be moved to a new site, and who bears the cost and risk.
Renewal
Renewal is the process of continuing or extending a franchise agreement at the end of its term, for which the Franchising Code requires the franchisor to give advance notice of its intentions and, unless the franchisee validly opts out, to provide updated disclosure.
Renewal fee
A fee payable when a franchisee renews or extends the franchise agreement at the end of its term.
Resale
A resale is the sale of an existing franchised business by one franchisee to an incoming franchisee, transferring the outlet as a going concern rather than opening a brand-new one.
Restraint of trade
A restraint of trade is a clause in a franchise agreement that limits what a former franchisee can do after the agreement ends, typically barring them from running a competing business for a set time within a defined area, and which the 2025 Franchising Code makes unenforceable in certain situations.
Return on investment (ROI)
Return on investment is a measure of how much profit a franchise generates relative to the money invested to open it, usually expressed as an annual percentage, and it is one of the clearest ways to compare franchise opportunities on financial merit.
Right of first refusal
A right of first refusal is a contractual right, commonly held by the franchisor over a franchisee's resale, or by an existing franchisee over new territory, to match a genuine third-party offer before the sale or grant can go to that third party.
Royalty
A royalty is a recurring fee a franchisee pays the franchisor for the ongoing right to operate under the brand and system, most commonly calculated as a percentage of the outlet's gross sales.
S
Same-store sales
Same-store sales measure the change in revenue of outlets that have been trading for a comparable period, excluding newly opened outlets, to show whether existing businesses are growing on a like-for-like basis.
Schedule 1 of the Franchising Code
The part of the Franchising Code of Conduct that sets out exactly what a franchisor must include in the disclosure document, item by item.
Significant capital expenditure
Significant capital expenditure is major spending, such as a fit-out or refurbishment, that a franchisor may require a franchisee to make, and which the 2025 Franchising Code says must generally be disclosed and justified before the franchisee is committed to it.
Single-unit franchise
The most common arrangement: the right to operate one outlet of a franchise in a defined location, as opposed to multi-unit or area development.
Site selection
Site selection is the process of choosing the specific premises for a bricks-and-mortar franchise, assessing foot traffic, visibility, parking, co-tenants, rent and catchment demographics, usually with franchisor approval, because location is one of the strongest predictors of an outlet's success.
Solvency statement
A signed statement in the disclosure document confirming the franchisor's directors' view that the franchisor can pay its debts as they fall due, backed by financial reports.
Specific-purpose fund
A fund franchisees pay into for a defined purpose, such as marketing, that the franchisor must administer and account for separately, under rules that expanded from 1 November 2025.
State Small Business Commissioner
A state-based office (in NSW, VIC, QLD, SA and WA) that offers small businesses, including franchisees, low-cost dispute-resolution and advice services.
Sub-franchisor
A party granted the right to appoint and support franchisees in a defined region, sitting between the master franchisor and individual franchisees.
Supply restriction
A term requiring a franchisee to buy goods or services only from the franchisor or approved suppliers. It must be disclosed, along with any rebates the franchisor earns from those suppliers.
System sales
The total combined sales of every outlet in a franchise network, a headline measure of a system's scale.
T
Technology fee
An ongoing charge for the franchisor's point-of-sale, software, apps or IT systems that franchisees are required to use.
Termination
Termination is the ending of a franchise agreement before or at the end of its term, and under the Franchising Code a franchisor must follow prescribed processes, including giving the franchisee a reasonable opportunity to remedy a breach, except in defined special circumstances allowing termination on short notice.
Termination compensation
Compensation a franchisor may owe franchisees when it ends agreements early because it is withdrawing from the Australian market or rationalising its network.
Territory
A territory is the defined geographic area set out in a franchise agreement within which a franchisee operates the franchised business, usually described by postcodes, suburbs, a map, or a radius.
Total investment
Total investment is the full amount of capital a franchisee needs to open and sustain an outlet to breakeven, combining establishment costs (including the initial franchise fee, fit-out and equipment) with the working capital required to trade through the early period.
Trade area
A trade area is the real-world geographic zone from which a specific outlet actually draws the large majority of its customers, based on how far people realistically travel to visit it.
Training fee
A charge, sometimes separate from the initial franchise fee, covering the franchisor's initial training of a new franchisee and their staff.
Transfer
A transfer is the sale or assignment of a franchised business from one franchisee to another, which under the Franchising Code generally requires the franchisor's consent and triggers disclosure obligations, with the franchisor not permitted to unreasonably withhold that consent.
Transfer fee
A transfer fee is the amount a franchisor charges to approve the sale or assignment of a franchise from an existing franchisee to a new buyer, meant to cover the franchisor's reasonable costs of processing, training and inducting the incoming franchisee.
Turnover rent
Rent calculated as a percentage of a business's sales, common in shopping-centre leases, sometimes in addition to a base rent.
U
Unconscionable conduct
Conduct by one party so harsh or against good conscience that the law intervenes. It is prohibited under the Australian Consumer Law and often arises in franchising disputes.
Unfair contract terms
Unfair contract terms laws under the Australian Consumer Law protect small businesses, including many franchisees, from one-sided terms in standard-form contracts, allowing a court to declare an unfair term void, with civil penalties now applying to businesses that rely on such terms.
Unilateral variation
A change one party, usually the franchisor, makes to the franchise agreement after it has been signed, without the other party's agreement. The Code restricts these, and retrospective changes are prohibited.
Unit economics
Unit economics is the profit-and-loss picture of a single franchise outlet, showing how much of its gross sales survives after cost of goods, wages, rent, franchise fees and other costs to become profit at that one location.
W
Working capital
Working capital is the cash a franchisee needs to fund day-to-day operations, such as wages, rent, stock and fees, during the early trading period before the outlet generates enough income to cover its own costs.