ACCC Guidance on “Reasonable Opportunity to Make a Return on Investment”: Clear Intent, Limited Clarity

Late last year, the ACCC provided further guidance on the recent amendments to the Franchising Code of Conduct, including the new requirement that franchise agreements provide franchisees with a reasonable opportunity to make a return on investment.

While the guidance is clearly well‑intentioned, in practice it leaves franchisors operating in a compliance landscape that remains far from settled.

The new requirement

From 1 November 2025, all franchise agreements (including renewals and extensions) must give franchisees a reasonable opportunity to earn a return on any investment required by the franchisor during the term of the agreement.

For these purposes, return on investment means that a franchisee should be able to recover the upfront capital required by the franchisor (such as franchise fees, fit‑out and equipment costs) and generate an ongoing profit over the term of the franchise agreement.

This obligation applies regardless of whether the franchisor makes any express financial representations.

What is a “reasonable opportunity”?

The ACCC describes a reasonable opportunity as what a typical person would see as fair and reasonable, assessed by reference to a range of contextual factors, including the duration and terms of the franchise agreement, the business model, the level of investment required, market conditions, fees and costs, franchisee capability, and the level of support provided.

Whether a franchisor has provided a reasonable opportunity will ultimately depend on the specific terms of the franchise agreement, the surrounding circumstances, and potentially the circumstances of the individual franchisee. The assessment is inherently fact‑specific and, to a significant extent, subjective.

How franchisors may provide a reasonable opportunity

The ACCC’s guidance places particular emphasis on the duration of the franchise agreement, noting that it should be fair and reasonable and long enough to allow franchisees to recoup their investment.

1. Whether the capital investment required is appropriate having regard to the business model and agreement term;
2. Whether the business model reflects profits that are reasonably attainable in practice;
3. The level of initial and ongoing costs imposed on franchisees;
4. The performance and profitability of franchisor‑owned outlets;
5. Whether fees and margins are appropriate for the sector;
6. Market saturation and competition;
7. Whether the franchisee meets selection criteria; and
8. Whether the franchisee has the necessary skills and experience

Guidance or “good practice”? 

In our view, the ACCC’s guidance reads more like a statement of good practice than a clear compliance standard. Importantly, it does not answer several questions that are likely to be central to future disputes, including:

1. Must every individual franchisee be capable of achieving a reasonable return, or is it sufficient that an average or typical franchisee could?
2. Can franchisors rely on historical network data, or must financial assessments be tailored to each site or territory?
3. How should franchisors treat outlier results caused by franchisee‑specific factors?
4. What financial metrics or information must actually be provided to prospective franchisees?
5. How should a franchisee’s ability to pay themselves for their labour and fund their personal living expenses be treated in assessing return on investment, and does a reasonable opportunity contemplate profitability beyond mere cost recovery where the franchisee relies on the business as their primary source of income?

What franchisors should do now

Against this backdrop, the following are some practical steps franchisors can take to address the new requirements:

1. Review agreement terms and duration;
2. Stress‑test the underlying business model;
3. Document ROI assumptions;
4. Be conservative with capital requirements;
5. Align fees with commercial reality;
6. Improve disclosure quality;
7. Review franchisee selection criteria; and
8. Avoid one‑size‑fits‑all assumptions.

Conclusion: clear intent, uncertain pathway

The ACCC’s intent is unmistakable, franchisees should not be locked into agreements that make a return on investment unrealistic. Whilst we agree with the sentiment, the pathway to compliance remains unclear, placing increased importance on conservative modelling, careful franchisee selection and transparent disclosure.