Franchise agreements are long and often legalistic – and when you’re excited about a new business opportunity, it’s easy to focus only on the big-ticket items: the upfront fees, the initial training, and how long you’ll be signed up for. But as any experienced franchise lawyer will tell you, the real detail – and potential future risk – often sits in the less prominent parts of the document.
Here’s what to look for when reviewing a franchise agreement.
Start with the Schedule – but Don’t Stop There
Most franchise agreements include a Schedule at the front or end of the document. This section sets out the key commercial terms – things like:
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The initial franchise fee
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Ongoing royalty or marketing fees
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The length of the agreement (called the Term)
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Whether you’ll have an Option to Renew
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Whether you’ll be granted an exclusive territory, and what that includes
These are crucial details, and every prospective franchisee should check them carefully. But too often, franchisees stop there. A proper legal review needs to go well beyond the Schedule – because what seems like a straightforward deal on paper can be heavily qualified by what’s in the rest of the agreement.
(a) Security and Personal Liability
This is one of the most important – and misunderstood – parts of a franchise agreement.
Many franchise agreements include personal guarantees, meaning that even if you’re operating through a company, you (and often your spouse or co-director) are personally liable for the franchisee’s obligations. If the business struggles, you could be chased personally for outstanding payments, termination costs or damages.
In addition, some agreements include clauses allowing the franchisor to register a PPSR (Personal Property Security Register) interest over your business assets, giving them a secured interest that ranks ahead of other creditors.
Even more concerning, some franchisors require bank guarantees or include provisions that create a charge over your real property – meaning your family home may be on the line if things go wrong.
A franchise lawyer will help you understand what security the franchisor is asking for and whether it’s fair and proportionate.
(b) What Support is Actually Promised?
Franchisors often promote their systems on the strength of their support, training, and business tools. But in many agreements, those promises are vague – or entirely absent from the contract.
You might find general statements about “ongoing assistance” or “training as required” – but these aren’t legally binding unless clearly set out.
A good franchise lawyer will check whether the support you’ve been promised is included in the agreement (or the operations manual – more on that below) and flag anything that’s missing. If you’re relying on specific onboarding, marketing support or a mentoring program, it should be written down clearly.
(c) Your Ongoing Obligations as a Franchisee
Franchise agreements come with many strings attached. These franchisee obligations are often spread across the document and can cover a wide range of practical matters – including:
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Regular reporting of sales or financial information
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Attendance at mandatory training or national meetings
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Complying with all local laws, health regulations and workplace obligations
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Keeping your premises open during specified trading hours
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Participating in promotions or local marketing campaigns
These obligations can be extensive and time-consuming. They’re not always obvious at first glance, which is why careful review is essential. If you’re not prepared to meet the ongoing obligations, you could be in breach – even if your business is running profitably.
(d) Operations Manual Obligations
Around 99% of franchise agreements contain a clause requiring the franchisee to comply with the Operations Manual. This manual often forms a key part of how the franchise system operates in practice – covering customer service standards, store fit-out, product handling, uniforms, branding and more.
However, the agreement often gives the franchisor the right to change the Operations Manual at any time. It’s important to understand:
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How updates will be communicated
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Whether you’ll be given a copy or just notice of a change
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Whether changes must be reasonable or consistent with the brand values
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What happens if the changes are costly or difficult to implement
As your franchise lawyer will explain, the Operations Manual is essentially a “living document,” and you’ll be legally bound by it, even though it can be changed after you sign.
(e) Trigger-Based Clauses: Renewal, Assignment, and Dispute Resolution
Finally, there are some clauses that only become relevant when a particular event occurs – but when they do, they can make or break your business outcome.
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Renewal Clauses: These usually require the franchisee to give notice (sometimes up to 6–12 months before expiry) and meet strict conditions – like no breaches and completion of refurbishments.
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Assignment Clauses: If you want to sell your franchise, the franchisor often has wide discretion to refuse or impose conditions on the sale.
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Dispute Resolution Clauses: These set out how disputes will be handled. There may be mandatory mediation steps, or limits on what kind of claims you can bring.
These clauses are often buried in the back of the agreement, but they kick in at critical points. You don’t want to be caught out just because you didn’t understand them upfront.
Final Thoughts from a Franchise Lawyer
Franchise agreements are legally binding documents. They’re also long, detailed, and full of legal jargon. While the commercial terms may look appealing, the real legal risks are often hidden in the fine print.
At Magnolia Legal, our franchise lawyers help clients understand not just what they’re signing – but what it will actually mean for their day-to-day business, their legal exposure, and their long-term investment.
Before you sign, make sure you understand the full picture. Speak to a franchise lawyer who specialises in franchising law – not just any lawyer.