The Franchising Code of Conduct (the Code) is very strict when it comes to Franchisor’s taking a non-refundable payment from a potential franchisee. Clauses 9 and 10 of the Code set out the conditions a franchisor must satisfy in order to keep a non-refundable deposit from a franchisee.

Clauses 9 and 10 of the Code Regarding Deposits

Clauses 9 and 10 of the Code operate concurrently when it comes to a franchisor taking a non-refundable payment. In summary, the two clauses state that a prospective franchisee:

  1. be given a copy of the Franchise Agreement (in the form it is to be executed), the Disclosure Document and the Code (collectively the “Franchise Documents”);
  2. be provided 14 days to read, understand and obtain advice (or confirm via a written statement they have decided to not obtain such advice) about the Franchise Documents; and
  3. provide to the Franchisor a written statement that they have had a reasonable opportunity to read and understand the Disclosure Document and the Code.

Only once all of the above has been complied with, a Franchisor may take a non-refundable payment from a prospective franchisee.

Information Statement

A prospective franchisee must also be provided a copy of an “Information Statement” in the form set out in the Code. This Information Statement should have been provided to the prospective franchisee as soon as practicable after the prospective franchisee completes an application form or expresses interest in becoming a franchisee.

Clause 10 Exceptions

Clause 10 provides a small exception in two circumstances before a franchisor can take a non-refundable payment. The exception is the need for the Franchisor to obtain from a prospective franchisee statements they have obtained advice on the franchise agreement if the Franchise Agreement to be entered into is:

  1. a renewal; or
  2. an extension of the term or scope.

In most cases where a Franchise Agreement is renewed or the term or scope is extended, franchisors will require a prospective franchisee to enter into a new franchise agreement. Accordingly, the above conditions will apply.

Disclosures Required in the Disclosure Document

Item 14.1 and 14.2 of the Disclosure Document concurrently operate to effectively require a Franchisor to disclose whether a prospective franchisee is required to make any non-refundable payment.

This means a Franchisor is required to set out under what circumstances a non-refundable payment will be made by a prospective franchisee and how much the non-refundable payment will be for.

In the Form to be Executed

One of the conditions for a Franchisor to take a non-refundable payment is the obligation for the Franchisor to provide a prospective franchisee with a franchise agreement “ïn the form it is to be executed”. This means the franchise agreement provided to the prospective franchisee must be complete, contain all of the terms and conditions which will apply to the prospective franchisee and also include all additional documents that a prospective franchisee would be required to enter into.

However, this does not require a Franchisor to provide a prospective franchisee with a Franchise Agreement that is in “final.” The Franchisor can provide the prospective franchisee with Franchise Agreement in the form a pro forma, template or master agreement. This is because clause 10(3) of the Code states the Franchise Agreement can be amended to (in summary):

  1. give effect to the prospective franchisee’s request;
  2. fill in particulars (e.g. name and address);
  3. provide minor clarification; or
  4. correct errors or references.


Before taking a non-refundable payment, a Franchisor should be careful to ensure all of the preconditions to taking such an amount has been satisfied. We can help you to review your process for issuing grants and your franchise documents to ensure you are compliant with these requirements – call our franchising lawyers on 1300 544 755.

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Masao Watanabe
Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at

View Privacy Policy