Half-price franchise resales: red flags and the questions to ask

• Disclosure documents created from 1 November 2025 must say whether the franchisor will require significant capital expenditure during the term, with as much detail as practicable on the amount, timing and reasons (items 14(1A) and 14(1B)).
• A separate site-history document must say whether the site or territory was run by an earlier franchisee in the last 10 years, and why they stopped (item 13).
• The ACCC warns that many owners at one site, known as churning, can mean it isn't a suitable location.
• The franchisor can attach conditions to its consent to the transfer, so ask what they are before you pay a deposit (s49).
• After an assignment, you can unwind the purchase before 14 days pass or before you take control, whichever is earlier (s52).

• Falling sales or margins, which the trading records should show, often after a new competitor opens or the area changes.
• A short remaining term with no option to renew, so you are buying a few years of trading rather than a business you can resell.
• A lease near expiry, a large rent review coming, or a landlord who hasn't agreed to an assignment.
• A refit, rebrand or equipment upgrade due soon. The ACCC says major refurbishments, relocations, rebranding, and equipment, software or technology upgrades are all likely to be significant capital expenditure.
• A seller under pressure from health, family or finances, or a franchisor pushing a sale after a dispute.
• Encroachment: a new outlet nearby, or online sales by the franchisor or other franchisees reaching into the territory (items 9 and 12).
• Changes at the franchisor, such as new owners, a network restructure or disputes with franchisees.
• Staff problems, such as high turnover or past underpayments, that you would need to fix.

1. The seller won't give you, or your accountant, full financial records for at least the last 2 to 3 years.
2. The site has had several franchisees in the last 10 years. The ACCC's model disclosure guidance says item 13 should give each former franchisee's name, the year they stopped and why.
3. Item 6 shows many transfers, closures or terminations across the network in the last 3 financial years.
4. The disclosure document flags a refit or other significant capital expenditure during the remaining term, and the price doesn't reflect it.
5. The remaining term is short, and the disclosure document carries the bold statement that you have no option to renew (item 18).
6. The lease has less time left than the franchise term, or the landlord's consent to an assignment isn't confirmed.
7. The franchisor says consent will come with conditions, such as a refit, extra fees or retraining, that aren't priced in.
8. The seller is in breach, or owes the franchisor money. Both are grounds on which the franchisor may reasonably refuse consent (s49(6)).
9. The franchisor's Register profile or item 4 of the disclosure document shows insolvency, civil judgments or current legal proceedings.
10. You are pressed to commit money before the franchisor has given you any documents, or before the 14-day wait ends.

• Why are you selling, and why now?
• What were sales, gross margin and net profit in each of the last 3 years, and what explains any change?
• How many hours do you work, and what do you pay yourself? Profit that relies on unpaid owner hours isn't profit a buyer can count on.
• Has the franchisor told you of any refit, rebrand or upgrade you will have to pay for, and when?
• What is left on the lease, when is the next rent review, and has the landlord agreed to an assignment?
• Who are the staff, which award covers them, what are they paid, and how will accrued leave be handled?
• Have you had any disputes with the franchisor, the landlord, staff or customers?

• Will you consent to this transfer, and on what conditions (s49)?
• Will you amend the franchise agreement on transfer, or require a new agreement (item 19)?
• What significant capital expenditure will you require at this site during the remaining term, and when (items 14(1A) and 14(1B))?
• Who ran this site in the last 10 years, and why did each franchisee leave (item 13)?
• Agreements transferred from 1 November 2025 must give a reasonable opportunity to make a return on the investment you require (s44). How does the remaining term allow for that?
• Are new outlets, online sales or delivery arrangements planned that will affect this territory (items 9 and 12)?
• What transfer, training and other fees will I pay, to whom and when (item 14)?

Illustrative only: these figures are assumptions, not data. A café resale is advertised for $120,000, well below similar outlets in the system, with 3 years left on a term that has no renewal option. Add what the discount is really paying for.

1. Start with the asking price: $120,000.
2. Add the refit the franchisor has flagged for year 2, quoted at $90,000: running total $210,000.
3. Add the rent increase at the review due in 12 months, assumed at $12,000 a year for the 2 remaining years after it: $24,000, running total $234,000.
4. Add working capital to carry the business through the refit and any dip in sales, assumed at $20,000: running total $254,000.
5. Compare $254,000 with the price of similar outlets that have longer terms. The 'half-price' café costs more than double its asking price, with 3 years left to trade.

• You know, in writing, why the business is for sale and why the price is low.
• Your accountant has checked at least 2 to 3 years of records and adjusted the profit for the owner's unpaid hours.
• You have the site history (item 13) and have called former franchisees listed in item 6.
• You have the franchisor's written answer on consent conditions, capital expenditure and any new agreement.
• You have checked the lease term, rent reviews and the landlord's consent to an assignment.
• You have priced every known risk into your offer, as in the example above.
• Your lawyer has reviewed the sale contract, the transfer documents and the franchise agreement.