Australian franchise agreements are governed by the strongest franchising disclosure regime in the common-law world — but territorial-rights clauses remain the single biggest source of dispute. A 'non-exclusive' territory or a franchisor's reserved right to open direct-to-consumer channels can undermine the deal you thought you were buying. Before signing, test the territory clause against the Franchising Code of Conduct (as updated from 1 April 2025) and the unfair contract terms regime under the Australian Consumer Law.
What is a Territorial Rights?
An Australian franchise agreement is a contract granting a franchisee the right to operate under the franchisor's system and brand within a specified area or relationship. It is governed by: the Competition and Consumer (Industry Codes—Franchising) Regulations 2024 (the Franchising Code of Conduct), which replaced the 2014 Code effective 1 April 2025; the Competition and Consumer Act 2010 (Cth), including Part IVB (industry codes) and the unfair contract terms regime in the Australian Consumer Law; and general contract, property, and intellectual property law. The 2025 Code strengthens termination rules, imposes a general obligation to act in good faith, and enhances the disclosure document obligations.
Red flags to watch for
Franchisors reserving the right to open corporate stores or grant additional franchises in your territory without compensation or consultation is a key area of dispute under the good-faith obligation (cl 6 of the Code).
Franchisors carving out e-commerce (website, app, Amazon, Uber Eats) from the franchisee's territorial rights can cannibalize the franchisee's bricks-and-mortar revenue. Encroachment compensation or revenue-share should be addressed.
'Your territory is the area served by this store' is so vague that the franchisor can effectively shrink it by opening adjacent stores. Insist on geographical boundaries (postcodes, radius, ABS SA2/SA3 areas).
Unilateral amendment clauses may be unfair contract terms under s 24 of the Australian Consumer Law. The 2025 Code also requires reasonable notice and good faith.
Without compensation, territorial reduction may breach the franchisor's good-faith obligation. The 2025 Code empowers the ACCC to take action for breaches.
Broad restraints on trade after termination must be reasonable to be enforceable. Post-termination restraints covering significantly more than the original territory routinely fail (Larrikin Music Publishing, Maggbury Pty Ltd v Hafele).
Item 6 of the updated Disclosure Document requires disclosure of franchisor-owned units and their territories. A silent document fails the Code.
The 2025 Code preserves the 14-business-day cooling-off period from entering a new franchise. Any waiver is invalid.
Your legal rights
Australian franchisees are protected by: the Competition and Consumer (Industry Codes—Franchising) Regulations 2024 (Franchising Code of Conduct), effective 1 April 2025, including the general good-faith obligation (cl 6), the disclosure document requirements (Part 3), cooling-off rights (cl 26), termination restrictions (Part 5), and prohibition on waiver of rights; the Competition and Consumer Act 2010 (Cth), including Part IVB and the Australian Consumer Law (Schedule 2); the unfair contract terms regime (ACL ss 23-28); the Independent Contractors Act 2006 where relevant; and general contract, tort, and intellectual property law. The ACCC enforces the Code and can obtain penalties (now up to $10 million per contravention for corporations). Franchisees can also pursue mediation, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), and the Federal Court of Australia.
Questions to ask before you sign
- 1Is the territory exclusive, non-exclusive, or mixed — and what specifically is reserved to the franchisor?
- 2How is the territory defined geographically (postcodes, radius, boundary map)?
- 3Does the franchisor sell through online channels or delivery platforms in my territory, and how is that handled?
- 4Can the territory be amended, reduced, or revoked unilaterally?
- 5What compensation applies if the territory is encroached or reduced?
- 6What does the disclosure document (Item 6 onwards) say about franchisor-owned stores?
- 7What post-termination restraints apply, and how long and wide do they extend?
- 8Has my lawyer or accountant signed the statement required under cl 10 of the Code?
- 9What dispute resolution applies — mediation, ASBFEO, or court?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.