Pros and cons of owning a franchise in Australia: the honest list
Franchising is neither a safe bet nor a trap. It trades some independence for a system, and the terms of that trade are in the contract, so here is a balanced list backed by the data that exists.
What are the pros and cons of owning a franchise?
- FranchiseScope's analysis of Franchise Disclosure Register profiles (captured 19 August 2026, self-reported by franchisors): 90.5% of systems report a restraint of trade (998 of 1,103 answering), and only 10.5% say goodwill goes to the franchisee (107 of 1,019).
- The same analysis: 70.2% restrict where franchisees buy supplies (809 of 1,152), 27.6% let the franchisor change the agreement (315 of 1,142), and 83.6% have a term of 5 years or more (of 1,147).
- In a 2023 survey for the Treasury review of the Code, 381 self-selected franchisees, 173 of them car dealers, rated their relationship with their franchisor 5.7 out of 10, and 126 reported a serious dispute in the previous 12 months.
- The small business ombudsman (ASBFEO) took on 68 new franchise disputes with a dedicated case manager in the June quarter of 2026, up from 43 in the June quarter of 2025.
- There is no official Australian franchise failure or success rate, and the US evidence is mixed.
The pros, with the evidence
- Protection before you sign. The Franchising Code requires the ACCC's information statement, a disclosure document, a copy of the Code and the final agreement, then a 14-day consideration period and, for a new agreement, a 14-day cooling-off period. Buying an independent business gives you none of these Code rights.
- Information you can compare. The Franchise Disclosure Register shows each system's setup costs, restraints, term and other key terms, free, before you contact anyone.
- A tested system. You buy a documented way of operating, with an operations manual, supply arrangements and training, instead of building one from scratch.
- Support. In a 2022 FRANdata survey for the Franchise Council of Australia, 80% of more than 1,000 franchise businesses across 83 systems said their franchisor was supportive. The survey was probably distributed through franchisors.
- Marketing with rules. Marketing and other specific purpose funds must be kept in a separate bank account, reported on every year and audited, unless 75% of contributing franchisees vote to waive the audit.
- Dispute pathways. Every agreement must include a complaints procedure, and either party can refer an unresolved dispute to mediation, with ASBFEO appointing the mediator.
- A way out. The franchisor must not unreasonably refuse a written request to transfer your franchise, and consent is deemed given if it hasn't refused in writing within 42 days.
- Penalties that bite. Since 1 April 2025 almost every obligation in the Code carries a civil penalty of up to 600 penalty units, which is $218,400 for conduct from 1 July 2026.
The cons, with the evidence
- Fees for the whole term. Royalties and marketing levies are often charged on sales whether or not you make a profit, and we found no authoritative Australian benchmark for royalty rates.
- Less control. 70.2% of the Register profiles we analysed restrict where franchisees buy supplies, and the operations manual can dictate much of your day.
- Restraints. 90.5% of systems answering report a post-term restraint of trade, which can stop you running a similar business after you leave.
- Goodwill. Only 10.5% say goodwill goes to the franchisee, so check what, if anything, you can sell at the end of the term.
- One-sided changes. 27.6% allow the franchisor to change the agreement, and when the ACCC reviewed 10 newer franchisors' agreements in 2023 it found potentially unfair terms in every one.
- Long commitments. 83.6% of systems report a term of 5 years or more, and fees and rent keep running in slow months.
- Relationship risk. Franchisees surveyed for the 2023 Treasury review rated the Code's effectiveness 4.2 out of 10, and only 12 of the 126 who had a serious dispute said they resolved it effectively.
- Franchisor risk. In our analysis, 20 Register profiles flag insolvency, 10 a civil judgment and 3 a serious offence, out of about 926 answering those questions.
What the evidence says about franchise success
- There is no official Australian franchise failure or success rate. The 2023 Treasury review said the ABS couldn't build a time series from Register data because of survivorship bias.
- The often-quoted claim that more than 90% of franchises succeed traces back to a 1980s US Department of Commerce survey that franchisors filled in voluntarily. The data was never audited.
- A 1994 US Census Bureau working paper by Timothy Bates found new franchise businesses had lower survival and profitability than new independent businesses; NBC News reported four-year survival of 65.3% against 72%.
- US Federal Trade Commission staff reported in 2024 that 3.9% of 66,291 SBA-backed franchise loans made from 2013 to September 2023 defaulted, against 3.5% of non-franchise loans, with some brands reaching 20%.
- Stakeholders told the Treasury review that heavy disclosure can make franchising look low-risk. The review said the Code is meant to improve conduct and access to information and dispute resolution, not to eliminate all misconduct or risk.
- So the most useful evidence is specific: the disclosure document, the Register profile, and current and former franchisees of the system you are considering.
Who franchising suits
- People who like working to a proven system and following set procedures.
- People with enough capital for the setup cost, working capital and a buffer for slow months.
- People who value training and a support network more than creative control.
- People comfortable paying ongoing fees in exchange for a brand and a system.
- People who will do the due diligence: reading the disclosure document, calling former franchisees and paying for independent advice.
- People who can commit for the full term, which is 5 years or more in most systems.
Who franchising doesn't suit
- People who want to set their own prices, suppliers, products or opening hours.
- People who want to build something they can sell on their own terms, given how few systems give franchisees the goodwill and how many impose restraints.
- People who would resent paying a share of sales whatever the profit.
- People relying on the brand to do the selling, or expecting passive income from an owner-operator model.
- People without a financial buffer, because fees and rent continue in slow months.
- People who won't accept the franchisor's decisions on system changes, refurbishments and technology.
How to get the pros without the worst cons
- Compare several systems on the Register: restraints, goodwill, supplier restrictions, one-sided changes and term.
- Read the disclosure document's three-year history of transfers, closures, terminations and buy-backs, then call former franchisees.
- Ask for any earnings information in writing, with its assumptions, and test it with current franchisees.
- Ask what is negotiable, such as the restraint's scope, the territory, goodwill on exit or an early fee holiday.
- Have a lawyer check for potentially unfair terms, such as one-sided variation, broad termination rights or set-off clauses.
- Use the full 14-day consideration period, and get legal and accounting advice before you sign.
- Remember that you can still cool off within 14 days of entering into a new agreement.
Checklist: weighing a specific franchise
- Do the numbers work after royalties, levies, rent and wages, with a buffer?
- What does the restraint of trade stop me doing, where and for how long?
- Who owns the goodwill, and what can I sell at the end of the term?
- Which suppliers must I use, and do I know whether the franchisor earns rebates from them?
- Can the franchisor change the agreement or the manual one-sidedly?
- What do current and former franchisees say about support and the relationship?
- Have an independent franchise lawyer and an accountant reviewed the deal?
Disclaimer: This information is based on material published by the relevant franchisor on the Franchise Disclosure Register. This information does not negate the need to undertake necessary due diligence including seeking independent professional advice if considering entering into a franchise agreement.
Sources
- Treasury: Independent Review of the Franchising Code of Conduct, final report (December 2023, released 8 February 2024)
- ASBFEO: Quarterly Report, April to June 2025
- ASBFEO: Quarterly Report, 1 April to 30 June 2026
- ACCC: Unfair contract terms in franchise agreements (December 2023)
- NBC News (from Entrepreneur): What Is the Real Survival Rate of Franchised Businesses? (16 September 2013)
- US Federal Trade Commission staff: Franchise Issue Spotlight (12 July 2024)
- FranchiseBuyer: More findings from the Australian Franchisee Survey 2022 (17 February 2022)
- Franchising Code of Conduct: Competition and Consumer (Industry Codes, Franchising) Regulations 2024, Federal Register of Legislation
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Frequently asked questions
Is owning a franchise worth it?
It depends on the system, the price and you. A franchise gives you a tested model, training, a brand and the Code's protections, in exchange for ongoing fees, less control, long terms and usually a restraint of trade. It is worth it when the numbers work after fees, current franchisees confirm the support, and you can live with the contract terms.
What is the biggest disadvantage of franchising?
For many owners it is the mix of ongoing fees and limited control: you pay a share of sales for the whole term while following the franchisor's rules on suppliers, products and changes. In FranchiseScope's Register analysis, 70.2% of systems restrict suppliers and 27.6% allow the franchisor to change the agreement.
Do franchises have a higher success rate than independent businesses?
There is no Australian data to say. The claim that more than 90% of franchises succeed comes from an unaudited 1980s US survey. A 1994 US Census Bureau study found new franchises survived less often than new independents, and US FTC staff found SBA-backed franchise loans defaulted slightly more often than other loans.
Can I sell my franchise when I want to leave?
Usually, with the franchisor's consent. The Code says the franchisor must not unreasonably refuse a written transfer request, and consent is deemed given if it hasn't refused in writing within 42 days. What you can sell depends on the agreement: only 10.5% of systems in our Register analysis say goodwill goes to the franchisee.
Who owns the goodwill in a franchise?
The agreement decides. In FranchiseScope's analysis of Franchise Disclosure Register profiles, only 10.5% of systems answering (107 of 1,019) said goodwill goes to the franchisee. Read the goodwill, end-of-term and restraint clauses together, and ask what compensation, if any, you would get if the franchisor doesn't renew.
Is franchising less risky because it's regulated?
Not necessarily. Regulation gives you information and time before you sign, not a guarantee of success. Stakeholders told the 2023 Treasury review that heavy disclosure can make franchising look low-risk, and the review said the Code is meant to improve conduct, information and dispute resolution rather than eliminate all risk.
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