What happens if your franchisor goes broke? Brand churn and insolvency checks

• Control: in voluntary administration, the administrator has all the powers of the company and its directors, and the directors can't use their powers (ASIC).
• Timing: the first creditors' meeting is held within 8 business days of the appointment, and the meeting to decide the company's future within 25 business days, unless a court extends the time.
• Outcomes: creditors vote to return the company to its directors, accept a deed of company arrangement, or put it into liquidation.
• In a liquidation, unsecured creditors are paid after the costs of the liquidation and employee entitlements, sharing whatever is left pro rata.
• Notice: the Code requires a franchisor to tell franchisees in writing, within 14 days of becoming aware, if it or an associate becomes externally administered and its disclosure document doesn't already say so.

These points come from ASIC's guides for creditors (INFO 74 and INFO 45, both reissued in June 2023). Other forms of external administration include receivership and small business restructuring.

• Voluntary administration aims to save the company or its business or, if that isn't possible, to get creditors a better return than an immediate winding up would.
• An independent registered liquidator is appointed as voluntary administrator and takes full control of the company, with all the powers of the company and its directors, including the power to sell or close the business.
• During the administration, unsecured creditors can't begin, continue or enforce claims against the company without the administrator's consent or the court's permission, and owners of property the company uses generally can't recover it.
• At the decision meeting, creditors can hand the company back to its directors, accept a deed of company arrangement (DOCA), or put the company into liquidation.
• A DOCA is a binding arrangement between the company and its creditors. It often lets the company pay all or part of its debts and then be free of them.
• In liquidation, a liquidator takes control so the company's affairs can be wound up in an orderly and fair way, collecting and selling assets and investigating what happened. Unsecured creditors can't start or continue legal action without the court's permission.
• To take part and vote, creditors lodge a proof of debt with supporting documents.

No official guide sets out exactly what happens to franchisees, because it depends on the agreement and the administrator's decisions. These are the points to work through with your lawyer.

• Who decides: while the franchisor is in administration, decisions about the network are made by the administrator, not the franchisor's directors.
• Your agreement: it is a contract with the company in administration. Whether it continues, passes to a buyer of the business or ends depends on its terms and on the outcome for the company.
• Money owed to you: refunds, rebates or other amounts the franchisor owes you make you a creditor, and ASIC's guides explain how to lodge a proof of debt and vote.
• Your obligations: don't stop paying fees, rebrand or walk away without legal advice, because you could put yourself in breach of the agreement.
• Winning isn't collecting: in the ACCC's Geowash case, the court ordered the director and franchising manager to pay $500,000 each in redress to franchisees, but both declared bankruptcy and franchisees received no financial redress. Geowash had gone into voluntary administration in October 2016.
• Money paid before a collapse: in one case ASBFEO reported in 2026, a franchisee had paid nearly $100,000 in franchise fees before the franchisor ceased trading.
• Timing: ASBFEO notes that once insolvency has occurred, the capacity to resolve disputes can be constrained, which is a reason to act early.

• Between Griffith's 2014 and 2016 surveys, of 1,214 brands on its database, 48 were no longer operating and 61 had stopped franchising: about 9%. The survey didn't record why, or what happened to their franchisees.
• FRANdata's 2015 report put unit turnover at 11% across about 900 brands, and 18% for food concepts; its public summary doesn't separate closures from transfers.
• In FranchiseScope's analysis of Franchise Disclosure Register profiles (captured 19 August 2026), 20 of 927 answering said the franchisor, an associate or a director had been bankrupt, insolvent under administration or a Chapter 5 body corporate. Answers are self-reported.
• The same analysis found 10 of 927 profiles flagged a civil judgment and 3 of 926 a serious offence conviction.
• ACCC cases have involved franchisors that went into liquidation. Jump Loops, listed by the ACCC as in liquidation, was ordered in 2021 to pay $23 million in penalties after representing that franchisees would have an operating swim school within 12 months; most never received one.
• The ACCC told the 2023 review that its ability to get redress for franchisees through the courts can be frustrated by parties declaring bankruptcy.

None of these proves a franchisor is in trouble, but each deserves a written question and a call to your adviser.

• A written notice under section 34 of the Code about a change in majority ownership or control of the franchisor or the system.
• A notice of a judgment against the franchisor or an associate that isn't paid within 28 days: at least $100,000 for a small proprietary company, or $1 million for other companies.
• A notice that at least 10% of franchisees, or 10 franchisees if that is fewer, have started civil proceedings against the franchisor.
• Missed Code deadlines, such as specific purpose fund statements, which are due within 4 months of year end and must reach you within 30 days after that.
• A Register profile that is out of date, or new 'yes' answers to its insolvency or judgment questions.
• Support levels dropping, or unexplained changes to fees or suppliers, noticed by several franchisees at once.

1. Read the solvency statement in item 21 of the disclosure document. At least one director must sign it, giving the directors' opinion on whether there are reasonable grounds to believe the franchisor can pay its debts as and when they fall due.
2. Read the financial reports for the last two completed financial years, or the independent audit that can replace them if it was done within 4 months of year end.
3. If the franchisor is new, or was insolvent in either of the last two years, look for the statutory declaration of solvency and independent audit report the Code then requires, and the period of any insolvency.
4. Check item 4 for current proceedings, and whether the franchisor, its directors or associates have been bankrupt, insolvent under administration or a Chapter 5 body corporate in the last 10 years.
5. Check the Register profile's answers on insolvency, judgments and convictions, and when the profile was last updated.
6. Search ASIC's published notices website for the franchisor company and any related entities.
7. Read item 6 for buy-backs, closures and terminations over the last three financial years, and ask former franchisees what they saw.
8. Find out who holds the lease on your premises. If the franchisor or an associate is your landlord, you must be given the head lease or a summary of its commercial terms, so ask what would happen to your occupancy if it failed.
9. Have an accountant review the financial reports and your total exposure.

1. Confirm the appointment on ASIC's published notices website and note the administrator's name and contact details.
2. Read every notice and report the administrator sends. The first creditors' meeting must be held within 8 business days of the appointment, with at least 5 business days' notice.
3. If the franchisor owes you money, lodge a proof of debt with supporting documents before the meetings so you can vote.
4. Keep trading lawfully, and keep records of everything you pay to and receive from the franchisor.
5. Get independent legal advice on your agreement, lease, supply arrangements and trade mark licence before changing anything.
6. Talk to other franchisees. The Code protects your right to associate, and a group may be able to deal with the administrator more effectively.
7. Contact ASBFEO early if a dispute is brewing, since options can narrow once insolvency has occurred.

• Read the item 21 solvency statement and financial reports with an accountant.
• Check item 4 and the Register for insolvency, judgments and convictions.
• Limit what you pay upfront, and remember that payments made during the 14-day consideration period must be refunded on written request.
• Know who holds your lease and who owns the trade marks and systems you rely on.
• Keep copies of your agreement, disclosure document and payment records somewhere you control.
• Stay in touch with other franchisees so you hear about problems early.