Key Takeaways
- Franchise agreements in Australia often contain unfair terms that benefit the franchisor at the expense of the franchisee.
- Recent updates to Australian Consumer Law have strengthened protections for franchisees against unfair contract terms, allowing for penalties against franchisors.
- Franchisees can seek to void unfair terms, apply for injunctions, claim compensation, lodge complaints with the ACCC, and access mediation services.
- Key indicators of unfair contract terms include significant imbalance, unnecessary protection of franchisor interests, and potential harm to franchisees.
- Franchisees are advised to have legal reviews of agreements and to scrutinise all terms before signing to avoid unfair conditions.
Franchising offers a great path to business ownership—but not every franchise agreement is fair. In Australia, many franchisees find themselves locked into contracts that heavily favour the franchisor. These agreements often include unfair contract terms (UCTs) that restrict autonomy, impose unreasonable conditions, and limit options for recourse.
If this sounds familiar, know that you have rights. Recent changes to Australian Consumer Law (ACL) have strengthened protections for small businesses, including franchisees. The following sections outline the key indicators of unfair contract terms, available legal remedies, and practical steps for securing informed legal protection.
What Is an Unfair Franchise Agreement?
An unfair franchise agreement is one that contains terms which:
- Create a significant imbalance between the franchisor and the franchisee;
- Are not necessary to protect the franchisor’s interests; and
- Would cause harm—financial or otherwise—if enforced.
According to the ACCC, some common examples include:
- The franchisor can change fees or terms at any time without your input;
- You are tied into unreasonable non-compete clauses even after the contract ends;
- The franchisor can terminate the agreement without fair warning or clear justification.
These are not just bad business—they may now be illegal under the ACL.
What’s Changed Under Australian Consumer Law?
The law has recently been updated to clamp down on unfair practices. As of November 2023, courts can impose serious penalties on franchisors who use unfair contract terms in standard form contracts. This includes fines of up to:
- $50 million for corporations,
- 30% of adjusted turnover (during the breach period), or
- Three times the value of the benefit gained—whichever is greatest.
These reforms represent a critical juncture for franchisors to review their practices and for franchisees to assert their rights against unfair treatment.
Further details about these reforms are available through the ACCC’s official guidance on unfair contract terms.
Legal Remedies for Franchisees
If you believe your franchise agreement includes unfair terms, you have a few key options:
1. Apply to Void the Term
The first step is to seek a court declaration that the term is unfair. Once declared, that term becomes void, meaning it cannot be enforced against you.
This remedy is available under Section 250 of the ACL, and the process often begins with a legal review of your contract.
2. Injunctions to Stop Enforcement
In urgent situations—like when a franchisor is trying to enforce a penalty clause or terminate your agreement—you can apply for an injunction. This prevents the franchisor from acting on unfair terms while the matter is being resolved.
3. Compensation for Loss or Damage
While the ACL itself focuses on voiding unfair terms, you might still be entitled to compensation through related claims—such as breach of contract, misleading conduct, or unconscionable conduct.
4. Lodge a Complaint with the ACCC
The ACCC is actively monitoring franchising practices. You can report systemic use of unfair terms, and in some cases, the ACCC may investigate or even take enforcement action.
5. Mediation Through the ASBFEO
Franchisees can access mediation and alternative dispute resolution services through the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), formerly known as OFMA. This provides a faster and more cost-effective alternative to court proceedings.
Tips to Avoid Unfair Franchise Agreements
Before signing anything:
- Have a lawyer review the agreement – do not rely on verbal assurances from the franchisor.
- Request and scrutinise the Disclosure Document provided under the Franchising Code of Conduct.
- Understand all termination clauses, fees, and restraints of trade.
- Watch for vague or one-sided terms—especially those that give the franchisor wide discretion.
These early steps can save you from major headaches—and losses—down the road.
Real Support for Franchisees
Navigating an unfair franchise agreement can feel overwhelming—but you do not have to face it alone. At Pentana Stanton Lawyers, we empower franchisees to stand up for their rights with clarity and confidence. Whether you are reviewing a new contract or challenging an existing one, we provide strategic legal guidance every step of the way.
We assist with:
- Analysing and interpreting franchise agreements
- Identifying and challenging unfair contract terms
- Negotiating fairer, more balanced outcomes
- Pursuing legal remedies where appropriate
Backed by deep expertise in franchise law and dispute resolution, our team is committed to helping you protect your investment and make informed decisions for your business future.
Take control of your franchise journey. Contact Pentana Stanton Lawyers today for a confidential consultation and find out how we can help you take meaningful action.
