How to end a franchise agreement lawfully: breach notices, no-fault exits and exit proposals

• Within 14 days of entering into a new agreement, you can cool off and get your payments back, less reasonable expenses the agreement sets out (s50 and s51).
• Serious grounds, such as insolvency, fraud or losing a required licence, allow termination on 7 days' notice (s57 and s58).
• Agreements entered into, renewed, extended or transferred from 1 November 2025 must provide compensation if the franchisor ends them early because it leaves Australia, rationalises its network or changes its distribution model (s43).
• A dispute about any termination can go through the Code's complaint and mediation process (Part 5).
• Agreements still under the 2014 Code have similar rules in clauses 26B to 29.

Item 17B of the disclosure document must summarise both sides' rights to end the agreement early, so start there.

1. Cooling-off: a new franchisee can terminate within 14 days of entering into the agreement, and the franchisor must refund within 14 days, less reasonable expenses the agreement sets out (s50 and s51).
2. Franchisee exit proposal: a written proposal at any time, with reasons, which the franchisor must answer substantively in writing within 28 days (s54).
3. Mutual agreement: both sides agree the terms, often recorded in a deed. Settling claims at this stage is allowed (s39(2)).
4. Franchisor termination for breach, after a breach notice and time to fix it (s55).
5. Franchisor termination without breach, where the agreement allows it, on reasonable written notice with reasons (s56).
6. Termination on 7 days' notice for the serious grounds in s57 and s58.

Selling the business can be a better exit than termination, because you may recover value for it. The franchisor can't unreasonably withhold consent to a transfer (s49).

1. Check your agreement and item 17B of your disclosure document for any exit rights you already have.
2. Write the proposal: the terms you want, such as an end date, what happens to stock, equipment and the lease, and any payment either way.
3. Set out your reasons. The Code requires them, and a later proposal for a different reason triggers a fresh 28-day response (s54(4)).
4. Send it in writing and keep proof of delivery. The franchisor must keep what you send for at least 6 years (s37), and so should you.
5. Expect a substantive written response within 28 days. If the franchisor refuses, the response must give reasons (s54(2)).
6. If it refuses, or offers terms you can't accept, give a written notice of dispute under the complaint procedure. If it isn't resolved within 21 days, either side can refer it to mediation (s72).
7. Get advice on personal guarantees, the lease, any restraint of trade and money owed before you sign an exit deed.
8. Keep trading and paying under the agreement until an exit is agreed. Walking away early can put you in breach.

This process applies when the franchisee has breached the agreement and doesn't agree to the termination.

1. Confirm the breach isn't one of the s57 or s58 grounds, which follow their own process.
2. Give a written notice saying you propose to terminate because of the breach.
3. Set out what must be done to remedy it.
4. Allow a reasonable time to remedy it. It need not be more than 30 days after the date of the notice, but it must be reasonable for that breach.
5. If the franchisee remedies the breach as the notice requires, you must not terminate for it (s55(3)).
6. If it isn't remedied, terminate in line with the agreement, in writing.
7. Expect that a dispute about the termination can go through the Code's dispute process (s55(4)).
8. Remember the stakes: a defective notice, or terminating after the breach is fixed, can attract up to 600 penalty units, which is $218,400 for conduct from 1 July 2026.

Some agreements let a franchisor terminate without any breach. The Code adds conditions.

• The franchisor must give reasonable written notice of the proposed termination, and its reasons (s56(3)).
• A clause saying the franchisor can terminate without the franchisee's consent doesn't count as consent (s56(2)).
• For agreements entered into, renewed, extended or transferred from 1 November 2025, the agreement must provide compensation if the franchisor terminates early because it withdraws from the Australian market, rationalises its networks in Australia or changes its distribution models in Australia (s43).
• The agreement must say how that compensation is worked out, with reference to lost profit, unamortised capital spending the franchisor asked for, the lost opportunity to sell goodwill, and wind-up costs.
• It must also provide for the franchisor to accept and buy back, or compensate you for, specified stock and essential specialty equipment or branded goods that can't be repurposed for a similar business.
• The ACCC's examples: reacquiring franchised territories to run as company stores is rationalising a network, and moving from shops to online-only sales is changing a distribution model.
• The agreement can't exclude compensation you may be entitled to outside the agreement when it ends early for a reason other than your breach (s43(5)).

The ACCC's guide to the 1 November changes gives an example for each compensation factor. The maths in the first item is illustrative only.

• Unamortised capital spending: the ACCC's example is a $20,000 coffee machine the franchisor required, designed to last 10 years, when the agreement ends in year 3. Illustratively, written off evenly at $2,000 a year, $14,000 would remain if the agreement ended after exactly 3 years.
• Lost profit: money you would have earned from sales or other income streams during the rest of the term had it not ended early.
• Goodwill: the value of the business's established reputation or customer base that you can't sell because the agreement ended.
• Winding-up costs: the ACCC lists paying off leases, reinstating and making good the premises, staff entitlements and accounting fees.
• Buy-back: in the ACCC's florist example, branded floral wraps and branded external signage had to be bought back or compensated for, but fridges and a computer system that could be reused in a similar business did not.

• Stopping trading or withholding fees without agreement can put you in breach and give the franchisor a right to terminate.
• Personal guarantees, lease obligations and equipment finance can continue after the franchise ends. Read each document.
• The ACCC's guidance says restraints of trade still apply if the agreement is ended early because you breached it.
• A franchisor can't make you pay the costs it incurs settling a dispute with you (s66).
• In the March quarter 2026, ASBFEO reported requests for help from franchisees offered 'take it or leave it' termination terms with little time to respond, and sought to have some offers paused while the Code's dispute process ran.
• Selling may return more than terminating. The franchisor can't unreasonably withhold consent to a transfer (s49).
• Both sides must act in good faith throughout, including when negotiating an exit (s18).

• Which Code governs the agreement, and what does item 17B say about ending it early?
• Is this a cooling-off, exit proposal, mutual, breach, no-fault or 7-day termination?
• Has every notice been given in writing, with the reasons and time periods the Code requires?
• Does s43 compensation apply, because the agreement was entered into, renewed, extended or transferred from 1 November 2025?
• What happens to stock, equipment, the lease, staff and any personal guarantees?
• Does a restraint of trade apply after the agreement ends?
• Has a notice of dispute been given, and is mediation needed?