Bubble tea might be sweet, but an ACCC compliance review can leave a bitter aftertaste.
On 2 November 2026, the ACCC announced that Sharetea Australia had paid $39,600 following two infringement notices alleging its franchise agreements required franchisees to pay its costs of settling disputes. Sharetea also agreed to amend provisions concerning cooling-off deductions, post-termination restraints and high interest on overdue fees.
These were allegations and regulatory concerns, rather than court findings that the terms were unlawful. Nevertheless, there are several lessons worth steeping in.
Dispute costs: you cannot pass every bill down the straw
Section 41 of the Franchising Code prohibits entering into an agreement requiring franchisees to pay the franchisor’s costs of settling a dispute, whether through the Code’s dispute process or otherwise.
Check broad indemnities and general costs clauses too. Moving the obligation elsewhere in the agreement does not make it compliant.
Cooling off: deductions need substance, not froth
Where a franchisee terminates under section 50(1), (3) or (4), section 51 requires the franchisor to repay, within 14 days, all payments connected with the agreement, subject to permitted deductions. This includes money and other valuable consideration.
A deduction must equal the franchisor’s reasonable expenses relating to termination, and those expenses, or their calculation method, must be set out in the agreement.
Both requirements matter. Naming an expense does not establish that it was incurred or reasonable. A fixed retention amount should not operate as an automatic forfeiture regardless of actual expenses.
Identify recoverable expenses, explain their calculation and retain supporting records. Lost future royalties should not simply be rebadged as administration costs.
Restraints: an overflowing cup of restrictions
At Magnolia Legal, we commonly see restraints disproportionate to the business: lengthy periods, sweeping geographic areas and cascades upon cascades of alternatives. More ingredients do not necessarily make a better blend.
Restraint law generally requires protection of a legitimate interest, such as confidential information, customer connections or goodwill, through restrictions no wider than reasonably necessary. Preventing competition alone is insufficient.
Assess the activities, duration and area against the actual business. A neighbourhood takeaway outlet and a national consultancy do not automatically justify identical restrictions. The Code also imposes specific restrictions on restraints following certain non-renewals.
Then consider the language. Prohibiting someone from “being involved in” any competing business, without defining involvement, invites uncertainty. Read literally, could buying a drink from another bubble tea brand count? That is a drafting concern, not a prediction that a court would adopt that interpretation.
Attempts to drag in spouses, children and other family members deserve equal scrutiny. Relatives do not automatically become contractually bound through their relationship with a franchisee. Requiring a franchisee to control another adult’s independent livelihood also raises proportionality concerns.
Cascades are not a magic ingredient. The ACCC has warned that multiple alternative areas and periods can obscure a restraint’s scope. Even where restraint law allows severance or reading down—particularly under NSW legislation—that does not immunise an overreaching clause from unfair contract terms scrutiny.
Unfair terms: trouble can bubble up before enforcement
Under the Australian Consumer Law, a term in an applicable standard form small business contract is unfair if it creates a significant imbalance, is not reasonably necessary to protect the advantaged party’s legitimate interests, and would cause detriment if applied.
Courts must consider transparency and the contract overall. The advantaged party must establish reasonable necessity. Offering or relying on unfair terms can attract penalties; franchisors should not wait for an enforcement dispute to review them.
Default interest: watch the extra toppings
Overdue interest should protect legitimate payment interests. Review the rate, compounding, commencement date and interaction with other default charges.
Excessive charges can raise both unfair contract terms and penalty concerns. Penalty law considers whether a charge is out of proportion to the legitimate interests protected, which may extend beyond direct losses. There is no universal safe percentage: the rate needs a defensible commercial basis.
Franchisors should review these provisions before their next grant or renewal. Keep deductions evidence-based, restraints tailored and default charges explainable. That is a better recipe than waiting for the ACCC to stir things up.