Most franchise agreements operate for a fixed term. Five, seven or ten years are common. If you plan to keep operating your franchised business beyond that initial term, you need to actively turn your mind to renewal rights, obligations and timing well before the end date arrives.
We regularly see franchisees assume renewal will “sort itself out”. In reality, renewal is often conditional, sometimes discretionary, and frequently expensive. Franchisees who plan ahead are far better placed to manage risk, control costs and protect their bargaining position.
Understanding Your Franchise Agreement
Your franchise agreement is always the starting point. Most—but not all—franchise agreements contain a renewal provision. Where it exists, it is often set out in the Schedule, with further detail in the operative clauses.
A key issue is whether renewal is expressed as a right (provided conditions are met) or whether it sits within the franchisor’s discretion. Even where renewal is framed as a right, it is almost never automatic.
Typical renewal conditions include:
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notice requirements, often requiring written notice between 9 and 6 months before expiry;
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full compliance with the franchise agreement, with no outstanding breaches;
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securing appropriate premises or a lease extension (where applicable);
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payment of a renewal or extension fee;
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signing a new franchise agreement for the renewal term;
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completion of refresher or updated training; and
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refurbishment or other capital expenditure.
Because these requirements can be time-critical and financially significant, franchisees should not wait until the franchisor’s notice arrives. We typically recommend diarising at least 12 months before the end of term and actively preparing for renewal.
Building a Franchise Renewal Plan
A franchise renewal plan should be deliberate and practical. At a minimum, it should address:
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confirmation of renewal rights, notice periods and conditions under the agreement;
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a compliance audit to identify and rectify any existing breaches;
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lease strategy, including timing, options and landlord consent requirements;
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likely capital expenditure, including refurbishment or rebranding;
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review of the current disclosure materials and historical updates;
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assessment of whether the proposed renewal agreement is commercially acceptable; and
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financial modelling to confirm the business remains viable under renewed terms.
Engaging a franchise lawyer early allows you to pressure-test assumptions, identify risks and avoid being forced into rushed decisions late in the process.
Understanding the Franchising Code
Renewal is also regulated by the Franchising Code of Conduct. While the Code was updated in 2024, similar protections existed under earlier versions.
Under section 36, the franchisor must notify the franchisee in writing whether it intends to extend the franchise agreement, enter into a new franchise agreement, or neither extend nor enter into a new agreement. That notice must be given at least 6 months before the end of the term (or 1 month for shorter agreements). Failure to comply attracts significant civil penalties.
Where a franchisor proposes to extend the agreement or enter into a new one, section 20 of the Code becomes critical. That section requires the franchisor to provide the franchisee with the prescribed disclosure, which is broader than just a disclosure document. It includes:
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the disclosure document;
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the franchise agreement in the form in which it is to be executed;
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the information statement; and
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a copy of the Franchising Code of Conduct.
The purpose of this prescribed disclosure is to give renewing franchisees sufficient information to make a reasonably informed decision about whether to proceed with renewal or extension, and on what terms.
This is particularly important because franchisors will typically require franchisees to enter into the then-current form of franchise agreement at renewal. That agreement may look very different to the one originally signed and can include higher fees, more stringent operational requirements, expanded discretion for the franchisor, increased reporting obligations, or additional capital expenditure obligations. These changes are often non-negotiable and can materially alter the risk and cost profile of the business.
Renewal and Good Faith
Both franchisors and franchisees are required to act in good faith in relation to renewal discussions. Good faith does not require a franchisor to agree to renew, but it does require parties to act honestly, cooperatively and not for an ulterior purpose.
In practice, issues can arise where renewal conditions are imposed late, applied inconsistently across the network, or used to pressure franchisees into accepting unfavourable terms. Early engagement and informed advice can help franchisees identify where good faith concerns may arise and how best to respond.
Why Early Advice Matters
Renewal is one of the most commercially significant points in the franchise lifecycle. It is your opportunity to reassess the system, the costs and whether continuing under the franchise model still makes sense for you.
Early advice from an experienced franchise lawyer allows you to plan strategically, manage risk and approach renewal from a position of control rather than urgency. If your franchise term is approaching its end—or even if it is still some time away—now is the time to start planning.