Who owns the goodwill in a franchise? Exit value, forced sales and non-renewal

• Goodwill is the value a business has beyond its assets, built from its reputation and its relationships with customers.
• You can usually realise goodwill only by selling during the term, and every sale needs the franchisor's consent (s49).
• If the agreement ends and the franchisor pays nothing for goodwill, the value you built may stay with the brand. The ACCC warns you may not get any value for goodwill at the end.
• The disclosure document must set out your goodwill rights, or state that you have none (item 18).
• Since 1 April 2025, a franchisor can't rely on a post-term restraint if it refuses a renewal you validly sought and offers no genuine goodwill compensation (s42 and s67).

Treasury's 2023 review of the Code described goodwill as an intangible asset arising from a business's reputation and its relations with customers: what a buyer pays above the fair market value of the assets, less liabilities.

• Brand goodwill: the value of the brand's trade marks and system, which you license for the term but don't own.
• Local goodwill: the customers, relationships, staff and reputation you build at your site or in your territory.
• Location goodwill: value tied to the premises, which depends on the lease as much as on the franchise.
• Who owns local goodwill is a contract question. The same review said Register data then indicated over 80% of franchise agreements explicitly excluded franchisee goodwill.
• It is often misunderstood: the review found many franchisees believed they were entitled to payment for the value they added, when their agreements said otherwise.
• In practice a buyer pays for goodwill, so its value depends on the remaining term, renewal rights and transfer terms you can pass on.

FranchiseScope captured 1,187 Register profiles on 19 August 2026. The figures are self-reported by franchisors, and percentages count only profiles that answered yes or no.

• Goodwill rights for the franchisee: 10.5% of profiles (107 of 1,019).
• Restraint of trade in the agreement: 90.5% (998 of 1,103).
• A term of 5 years or more: 83.6% of the 1,147 profiles that state a term.
• By FranchiseScope category, the goodwill share in groups with at least 45 answers ranged from 4.0% for automotive brands (n=50) to 16.9% for cleaning brands (n=59).
• A 'no' doesn't always mean you leave with nothing. You may still be able to sell during the term, and item 18 says whether the franchisor has a first right of refusal and how market value is worked out.
• A 'yes' needs reading too. Ask what the rights are, how they are valued and when they apply.

• Non-renewal at the end of the term. In a case decided in 2023, 38 Mercedes-Benz dealers alleged $650 million in lost goodwill after receiving non-renewal notices. The Federal Court found for the manufacturer, reiterating that there has long been no right at law to goodwill compensation on non-renewal.
• No option to renew. If the disclosure document carries the bold statement that you have no option to renew, the franchisor may simply let the agreement end (item 18).
• Termination for breach. The Code's restraint limit doesn't apply, so a post-term restraint can still bind you.
• A rushed sale. If you must sell quickly because of health, finances or a dispute, buyers will discount for the time pressure and any short remaining term.
• A refused transfer. The franchisor must not unreasonably withhold consent, and if it hasn't refused in writing within 42 days, consent is deemed (s49).
• Early termination for the franchisor's business reasons. Agreements entered into, renewed, extended or transferred from 1 November 2025 must provide compensation if the franchisor ends them because it withdraws from Australia, rationalises its network or changes its distribution model, by reference to lost profit, unamortised capital expenditure it requested, the lost opportunity to sell established goodwill, and wind-up costs (s43).
• Franchisor insolvency. The ACCC's information statement warns you may not be compensated for the loss of your business if the franchisor becomes insolvent.

Since 1 April 2025, a franchisor must not include, or rely on, a restraint that would apply after it refuses to renew or extend, if all of the following are true (s42 and s67):

1. The agreement contained an option for you to renew or extend it.
2. Before expiry, you gave written notice seeking to renew or extend on substantially the same terms as the franchisor's current agreement for other franchisees.
3. You met the conditions in the agreement for renewing or extending.
4. You weren't in serious breach of the agreement, or a related agreement, immediately before expiry.
5. You hadn't infringed the franchisor's intellectual property, or a confidentiality agreement with it, during the term.
6. The franchisor didn't renew or extend the agreement.
7. You claimed goodwill compensation and received only a nominal amount, or the agreement didn't let you claim it.

1. Before signing, read item 18 and the agreement's goodwill clause together, and ask the franchisor to explain in writing what you can sell, when, and to whom.
2. Ask for an option to renew with clear conditions. Without one, the Code's restraint limit can't help you at the end of the term.
3. Ask for a goodwill compensation formula that applies if the franchisor refuses renewal for reasons other than your breach.
4. Match your lease to your franchise term and options, so a buyer inherits a site as well as a franchise.
5. Plan any sale while plenty of term remains, because the remaining term and renewal rights are what a buyer pays for.
6. Keep complete, clean financial records every year, because buyers pay for profit they can verify.
7. Know the transfer rules: a written request with the information the franchisor needs (s48), consent that can't be unreasonably withheld, and deemed consent after 42 days without a written refusal (s49).
8. Before a big refit late in the term, ask whether the franchisor will take that spending into account in the end-of-term arrangements. Item 18 must say whether it will.

• Does the agreement give me any rights to goodwill I generate, and how are they valued?
• Do I have an option to renew, and what conditions must I meet?
• If you don't renew, will you pay for goodwill, and how is that worked out?
• Can I sell during the term, do you have a first right of refusal, and how is market value set?
• Will you buy back stock, equipment and marketing material at the end, and at what price (item 18)?
• What restraint of trade applies after the agreement ends, and does it still apply if you refuse to renew?
• How many agreements were not renewed, or bought back, in each of the last 3 financial years (item 6)?