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40 questions to ask a franchisor before you buy
A franchisor's sales meeting is a chance to test the disclosure document, not replace it. Each question below points to the Franchising Code document or disclosure item where the written answer should be.
What questions should you ask a franchisor?
Ask questions that test the disclosure document rather than the sales pitch: the franchisor's track record and finances, the full costs, the evidence behind any earnings figures, supply and rebates, capital spending, specific purpose funds, territory, and what happens when you want to leave. Good answers point to a document, such as item 14 for costs or item 18 for end-of-term arrangements, and are confirmed in writing before you sign.
- The franchisor must give you the ACCC's information statement within 7 days of your formal application or expression of interest (s22).
- It must give you the disclosure document, the agreement in the form it will be signed and a copy of the Code, then wait 14 days before signing (s23).
- The disclosure document must follow the order and numbering in Schedule 1 of the Code, so the item numbers below are the same for every franchisor (s20).
- Get important answers in writing. The ACCC warns that 'entire agreement' clauses can make the written agreement override what you were told.
- Ask the same questions of current and former franchisees, whose contact details are in item 6.
Questions 1 to 8: the franchisor and its track record
- How long has this system operated in Australia, and what experience do you and your officers have running it? (items 2 and 3)
- Who owns the franchisor, and has majority ownership changed recently? A change must be notified to you in writing within 14 days if it isn't already disclosed (s34).
- Are there current proceedings, or final civil judgments in the last 5 years, against the franchisor, its associates or their directors? (item 4)
- Has the franchisor, an associate or a director been insolvent, or convicted of a serious offence, in the last 10 years? (item 4, and the Register's integrity answers)
- What percentage of franchisees were in mediation, conciliation or arbitration last financial year, and what were the disputes about? (item 4(4))
- How many franchises were transferred, closed, terminated, not renewed or bought back in each of the last 3 financial years, and why? (item 6)
- Can I see the directors' solvency statement and the last 2 years of financial reports, or the independent audit? (item 21)
- What do you do to encourage, support or train franchisees to comply with workplace laws? (a question the ACCC's information statement suggests)
Questions 9 to 16: costs, fees and funds
- What does it cost to open, broken down into property, fit-out and equipment, opening stock, deposits and licences, and working capital? (item 14(3))
- What will I pay you and your associates each month and year, on what formula, and will I pay fees even when I'm not making a profit? (item 14(6))
- What will I pay other businesses you require me to use, such as suppliers, software providers or landlords? (item 14(7))
- Do you require any payment before I sign? Why, who holds it, and when is it refunded? (items 14(1) and 14(2))
- Which specific purpose funds will I pay into, such as marketing, technology or training funds, how much, and do other franchisees pay a different rate? (item 15)
- Can I see the latest statement for each fund, and when will I receive statements and audit reports? (item 15 and s31)
- What are your legal costs for the agreement? They must be a fixed amount stated in the agreement (s38).
- How much working capital do franchisees typically need, and how long do they take to break even? (questions the ACCC's information statement suggests)
Questions 17 to 24: earnings, supply and rebates
- Do you give earnings information? If so, is it historical or projected, for which outlets, and on what assumptions? (item 20)
- Do your projections include depreciation, a salary for the franchisee and the cost of servicing loans? (item 20(4))
- How do the outlets behind your earnings figures differ from the one I would run? (item 20(2))
- Must I buy only from you or approved suppliers, and do you or an associate own any of those suppliers? (item 10)
- Do you receive rebates or other benefits from suppliers, how much as a percentage of group purchases, and do franchisees share in them? (item 10)
- Must I hold minimum stock or buy minimum volumes? (item 10(1)(a))
- Can you change the range of goods or services I sell, and to what extent? (item 10(1)(i))
- Can I sell online, and do you or other franchisees sell online into my territory? (item 12)
Questions 25 to 32: territory, site, support and change
- Is my territory exclusive, and can you, an associate or other franchisees operate or open similar businesses in it? (item 9)
- Can you change my territory or site, and in what circumstances? Could I face competition from businesses not associated with you? (item 9)
- Has this site or territory been run by an earlier franchisee in the last 10 years, and why did they stop? (item 13)
- Do you or an associate have an interest in my lease? If you sublease to me, can I see the head lease or a summary of its terms and incentives? (item 13 and s23)
- What initial training and ongoing support will I get, what does it cost, and where is that written in the agreement or operations manual?
- What significant capital expenditure will you require during my term, such as refits, rebranding or technology upgrades, with amounts and timing? (items 14(1A) and 14(1B), and s47)
- Have you changed franchise agreements one-sidedly in the last 3 financial years, and when could you do so in future? (item 17)
- Do you or an associate offer finance, and do you require a minimum amount of unborrowed working capital or a set debt-to-equity ratio? (item 16)
Questions 33 to 40: disputes, renewal and exit
- How are complaints handled, and does the agreement provide for arbitration in line with the Code? (item 17A and s69)
- In what circumstances can you end the agreement early, and when can I? (item 17B)
- What is the term, do I have an option to renew or extend, and on what conditions? (item 18)
- What rights will I have to goodwill I build, or do I have none? (item 18)
- Will you buy back stock, equipment and marketing material at the end, and how will the prices be set? (item 18)
- Can I sell during the term or at the end, do you have a first right of refusal, and how is market value worked out? (item 18, s48 and s49)
- Is there a restraint of trade after the agreement ends, and what area and period does it cover? (item 18)
- If you end the agreement early because you leave Australia, shrink the network or change how you distribute, how will I be compensated? (s43, for agreements from 1 November 2025)
What a good answer looks like, and documents to request
- A good answer points to a document and a figure, such as the relevant disclosure item plus recent invoices, rather than 'most people spend about that'.
- It matches what current and former franchisees tell you, and what the Register profile says.
- It comes in writing when you ask, especially on earnings, capital expenditure and territory.
- Request the disclosure document with every attachment, including the separate site-history document (item 13), which the ACCC says should name earlier franchisees, the year they stopped and why.
- Request the latest statement for each specific purpose fund, which must be attached to the disclosure document (item 15).
- Request the agreement in the form it will be signed, and related agreements such as leases, guarantees and confidentiality deeds, at least 14 days before signing if they are available (s30).
- Request the operations manual's contents list and the training schedule.
- Ask for documents in printed form, electronic form or both. The franchisor must comply with your request (s25).
Checklist: after you meet the franchisor
- Write up the answers the same day, noting who said what.
- Email the franchisor a short list of the key answers and ask it to confirm or correct them.
- Mark each answer against the disclosure item it relates to, and follow up any mismatch.
- Put the same questions to at least 5 current and 5 former franchisees from item 6.
- Give your lawyer and accountant the answers along with the documents.
- Don't sign until every material question has a written answer you are satisfied with.
This guide is general information, not legal or financial advice. A franchise lawyer and an accountant can help you test the franchisor's answers against the disclosure document and the agreement.
Sources
- Franchising Code of Conduct: Competition and Consumer (Industry Codes, Franchising) Regulations 2024, Federal Register of Legislation
- Competition and Consumer (Industry Codes, Franchising) (Additional Information Required by the Secretary) Determination 2022, compilation of 1 April 2025, Federal Register of Legislation
- ACCC: Information statement for prospective franchisees (April 2025)
- ACCC: Franchising model disclosure document guidance (April 2025)
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Frequently asked questions
What should I ask a franchisor at the first meeting?
Start with the questions that decide whether to go further: the full cost to open, what you will pay each year, whether and how earnings information is given, the territory, the term and renewal rights, and how many franchisees left in the last 3 financial years. Ask which disclosure document item answers each one.
What questions should I ask about franchise fees?
Ask what you pay the franchisor and its associates, on what formula and when (item 14(6)); what you pay others it requires you to use (item 14(7)); which specific purpose funds you contribute to and at what rate (item 15); and, as the ACCC suggests, whether you pay fees even when you aren't making a profit.
Should I ask a franchisor about earnings?
Yes. If the franchisor gives earnings information, it must be in or attached to the disclosure document, and projections must state their assumptions, the period covered and whether they include depreciation, a franchisee salary and loan costs (item 20). If it gives none, the disclosure document must say it can't estimate earnings for a particular franchise.
What documents should a franchisor give me before I sign?
The ACCC's information statement within 7 days of your formal application or expression of interest, then the disclosure document, the agreement in the form it will be signed and a copy of the Code, after which it must wait 14 days before signing. Related agreements, such as leases and guarantees, must come at least 14 days before signing if available.
How do I know if the franchisor's answers are true?
Check each answer against the disclosure document, the franchisor's Register profile and what current and former franchisees tell you. Ask for important answers in writing, because 'entire agreement' clauses can override what you were told verbally. If answers conflict, ask for a written explanation and take it to your lawyer before signing.
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FranchiseScope provides general information, not financial or legal advice. Always read the disclosure document and obtain independent advice before signing.