Buying a franchise or an independent business: the differences that matter

A franchise and an independent business can look alike on a listing, but with a franchise you also step into an agreement with a franchisor that sets many of the rules, charges ongoing fees and has a say in whether you can buy at all. This guide covers what you gain and give up, the costs, the Franchising Code of Conduct and how to compare the two. Read it with our due diligence guide.

What a franchise gives you

It varies between systems, but can include:

• a known brand, with marketing that may be run for the whole network
• systems, such as an operations manual, software and procedures
• training and support before and after you open
• supply arrangements, sometimes negotiated for the network
• other franchisees to learn from.

What you give up

The ACCC (Australian Competition and Consumer Commission) says franchisees must follow most of the franchisor's rules for running the business, even when they disagree. Depending on the agreement, that can limit:

• What you sell and charge, including the range, promotions and how much say you have over prices.
• Suppliers. The ACCC notes you may have to use a nominated supplier even when others are cheaper.
• Fit-out, including its look and when it must be refurbished.
• Territory: where you can trade and who can compete with you.
• Selling. You need the franchisor's consent to sell during the term, and the brand stays with the franchisor.

The ongoing costs

The ACCC compares a franchise to a car: the upfront price, then the running costs. Look for:

• Franchise fees and royalties, which may be fixed or worked out from sales.
• Marketing fund contributions, and payments into other funds, such as a technology or refurbishment fund.
• Refurbishments and other capital expenditure the franchisor requires.
• Supplies from required suppliers, which may pay the franchisor rebates it does not have to share.
• Transfer costs, such as an assignment fee and training fees.

The ACCC says costs must be in the disclosure document, and not paying them can put you in breach of the agreement.

The Franchising Code of Conduct

The ACCC says a new Franchising Code of Conduct was introduced on 1 April 2025, with some rules applying from 1 November 2025, so check that guidance is current. The franchisor must give you:

• The information statement, explaining franchising and its risks, within 7 days after you show interest and before any other document.
• The disclosure document, the franchise agreement and a copy of the Code, in final form, at least 14 days before you sign. This also applies when an existing agreement is transferred to you.
• Copies of other agreements you must sign, such as a guarantee.

The disclosure document covers set-up and running costs, supply restrictions and rebates, the franchisor's solvency, legal action against it, future capital expenditure and contact details for current and former franchisees. Earnings information is optional, but if none is given the document must say so.

Marketing and other funds. The marketing fund rules now cover any specific purpose fund. The money must be kept in a separate account, used only for its purpose and reported in an annual statement that must generally be audited, and you must get the latest one. Franchisees usually have no say in how it is spent, and paying in does not mean your business must be advertised from the fund.

Cooling-off. A new agreement can generally be ended in writing within 14 days of entering into it, with your money refunded within 14 days, less reasonable expenses set out in the agreement.

Buying an existing franchise

• Consent. The seller must ask the franchisor in writing. The ACCC says consent must not be unreasonably withheld, but can be refused if, for example, you do not meet the franchisor's selection criteria or the seller owes it money.
• Conditions. Consent can come with conditions, such as an assignment fee or fixing defects at the premises, so agree who pays in the contract of sale.
• Which agreement. You may take over the seller's agreement, or sign a new one for the rest of the seller's term.
• Cooling-off. You can end a transferred agreement by written notice up to 14 days after becoming the franchisee or the day you take possession and control, whichever is earlier. The seller must then refund money paid under the transfer agreement within 14 days, less reasonable expenses set out in it.

The term left and renewal

With an existing franchise, you buy the right to trade under the brand for the rest of the term, and the ACCC notes this value can reduce significantly over time. Is the term left long enough to recover what you pay? Franchisors do not have to renew unless the agreement says so, and must give an end of term notice at least 6 months before it ends. Check any rights to goodwill at the end, and any restraint on running a similar business.

The lease

The franchisor or a related company may hold the lease and sub-lease the premises to you. You must then get the lease and related information at least 14 days before you sign, and can generally end the franchise agreement within 14 days after receiving it. Ask what happens if the lease and franchise agreement end at different times. If the seller holds the lease, see assigning a commercial lease.

Check the franchisor

• The Franchise Disclosure Register. The ACCC says to be careful with any franchisor that is not on it.
• Other franchisees. The ACCC suggests speaking to at least 5 current and 5 former franchisees. Their contact details are in the disclosure document (a former franchisee can ask to be left out), and you do not need the franchisor's permission to call them.
• Answers in writing, or better, in the agreement.
• Advisers. The ACCC recommends a lawyer, accountant and business adviser with franchising experience.

The independent route

An independent business has no franchisor. You choose the products, prices, suppliers, fit-out and hours, pay no royalties or fund contributions, and need no franchisor consent to sell.

The trade-off is that you build or keep up the brand and systems yourself. The profit can also depend more on the owner's skills, relationships and local reputation, so test how much would leave with the seller. With no disclosure document, what you learn comes from the seller, the records and your own checks.

Comparing like with like on BizExchange

Browse franchises for sale alongside independent businesses in the same industry.

• Profit basis. Listings label profit as net profit, EBITDA or owner's benefit, and the Multiple is the asking price divided by that profit, so compare multiples on the same basis. See how to read a business-for-sale listing.
• Royalties. For a franchise, royalties and fund contributions are costs of the business, so the profit should be after them. Ask the seller to confirm this, and at what rates.
• The term. The same multiple is not the same deal if one agreement ends soon with no right to renew.

Making the decision

• A franchise may suit you if you want a tested system and support, are comfortable following someone else's rules, and the numbers work after every fee and refit.
• An independent business may suit you if you want control, know the industry and are confident the profit will not leave with the seller.
• Either way, you carry the financial risk. Run the numbers with our business loan calculator and get advice before you sign.

Questions to ask before you buy a franchise

• What are all the fees and refurbishment costs, and can they change?
• Which suppliers must I use, and what rebates does the franchisor receive?
• What territory do I get, and who else can trade in it?
• How many years are left, and what are my rights to renew?
• What are the selection criteria for buyers, and what will the transfer cost?
• Can I see the latest marketing fund statement?
• For current and former franchisees: would you buy again, can you pay yourself a wage, and has the franchisor kept its promises?