What is a franchise? How franchising works in Australia
Before you weigh whether to buy one, it helps to understand exactly what a franchise is, what you are really buying, and what the franchisor keeps.
What is a franchise?
In practice you are buying a proven format, a recognised name, training and ongoing support, and usually a defined territory, in exchange for fees and a loss of some independence. You own and fund your individual business; the franchisor owns the system it sits inside.
How the franchisor-franchisee relationship works
The franchisor develops and protects the brand, sets the operating standards, and supports the network. The franchisee invests the capital, runs the day-to-day business, and follows the system. The franchise agreement sets out exactly what each side must do, for how long, and on what terms renewal or exit happens.
- The franchisor provides: the brand, the operating system, training, marketing and (usually) a territory.
- The franchisee provides: the capital, the site or vehicle, the labour, and the fees.
- Both are bound by the franchise agreement and the Franchising Code 2025.
What you pay for
Franchise costs fall into four buckets: a one-off initial franchise fee (commonly $25,000-$55,000), the establishment or fit-out spend, ongoing fees (a royalty and a marketing levy, usually a percentage of gross sales), and working capital to survive the ramp-up. The all-in figure, not the headline fee, is what actually commits you.
How franchising is regulated in Australia
The Franchising Code of Conduct 2025 is a mandatory industry code under the Competition and Consumer Act. It requires the franchisor to give you a disclosure document, the agreement and an information statement at least 14 days before you sign, gives you a 14-day cooling-off period after signing, and imposes a duty of good faith on both parties.
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Frequently asked questions
What is the difference between a franchise and a business you start yourself?
With a franchise you buy into a proven brand and system and pay ongoing fees, but you must run the business the franchisor's way. Starting your own business gives you full independence and no royalties, but no established brand, systems or support. Franchises typically trade freedom for a lower-risk, tested format.
Do you own a franchise or just rent the brand?
You own your individual business, its assets, staff and cash flow, but you licence the brand and system from the franchisor for the term of the agreement. When the term ends, continued use depends on renewal under the agreement.
Is a franchise regulated in Australia?
Yes. The Franchising Code of Conduct 2025 is mandatory and enforced by the ACCC. It sets disclosure obligations, a 14-day pre-signing disclosure period, a 14-day cooling-off period, and a duty of good faith.
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