The great Australian dream for many is owning their own business, and franchising often looks like the most secure path to get there. It offers a proven brand, an established system, and a network of support. However, a recent change in the rules has introduced a phrase that sounds reassuring but is full of ambiguity, leaving many aspiring entrepreneurs in a tricky position.
In 2025, a significant update to the ACCC’s Franchising Code of Conduct came into effect. This change mandates that franchisors must provide prospective franchisees with a ‘reasonable opportunity to make a return on your investment’. On the surface, this sounds like a fantastic safety net. But what does it actually mean? The problem lies in the wording. An opportunity is not a guarantee, and the term ‘reasonable’ is left wide open to interpretation.
According to the official guidance from the ACCC, the responsibility to assess this opportunity falls squarely on the buyer. The new ACCC franchise rules 2025 offer a false sense of security. They don’t define what a reasonable return is, nor do they protect you if that return never materialises. It’s up to you, the investor, to determine what a truly worthwhile return looks like before you sign on the dotted line.
That ambiguity in the rules becomes much more serious when you consider the real-world commitments you’re making. For many Aussies, buying a franchise involves borrowing against the family home, committing to a five or ten year commercial lease for a shopfront, and taking on the legal responsibilities of employing staff. These are tangible, high-stakes risks that stand in stark contrast to the intangible promise of a ‘reasonable opportunity’. The legislation offers no parachute if the business struggles to turn a profit.
This is where the concept of a ‘payback period’ becomes critical. Many people assume that if they recoup their initial investment by the end of the first franchise term, they’ve succeeded. But think about that for a moment. It means you’ve worked for five or more years for zero net gain, only to get back to your starting line. You’ve taken all the risk for nothing. While industry data from IBISWorld projects the Australian franchise sector will see significant revenue growth, this doesn’t guarantee success for every individual outlet. Profitability can vary wildly, making your own due diligence essential when considering buying a franchise Australia, a topic we explore across many business scenarios on our blog.
So, how do you define a return that makes the sleepless nights and financial risk worthwhile? It’s not just about breaking even. A genuine return has three distinct components that you must calculate before making any commitment. Funding this initial outlay often requires a significant capital injection, which is where solutions like our private funding loans can be critical.
Here’s how to break it down:
As experts at Franchising WA note, success is heavily dependent on your approach and due diligence.
| Component | Description | Example Calculation (for a $200k investment over 5 years) |
|---|---|---|
| Market-Rate Salary | Your annual wage for running the business. | $80,000 |
| Annual Investment Payback | The initial investment divided by the franchise term (in years). | $40,000 ($200,000 / 5 years) |
| Annual Risk Premium | The profit needed to justify the risk (e.g., 8% of initial investment). | $16,000 ($200,000 x 8%) |
| Total Target Annual Profit | The minimum profit the business must generate before tax. | $136,000 |
Note: This is a simplified model. Figures for salary, investment, and risk premium should be adjusted based on your specific industry, location, and personal financial requirements.
Once you’ve done the maths and are confident in the opportunity, securing the right franchise business loan is the next hurdle. Traditional banks are often slow, demanding mountains of paperwork and adhering to rigid credit criteria that can cause a promising deal to fall through. When a great franchise location becomes available, you don’t have weeks to wait for a loan approval.
This is where alternative franchise finance from private lenders like fundU makes a difference. We understand the pressures of business. We offer the possibility of same-day funding, options for entrepreneurs with a less-than-perfect credit history, and a streamlined digital application that cuts through the red tape, which you can see in our simple process. This flexibility is crucial for anyone buying a franchise Australia. For new ventures without years of financial statements, products like our no-document business loans can bridge the gap. Furthermore, features like deferred repayments can protect your cash flow during those critical first few months of operation. As most financial advisors will point out, franchisees can secure funding from both banks and non-bank lenders, each offering different advantages, and requirements to meet.
The most effective way to validate a franchisor’s claim of a ‘reasonable opportunity’ is to do your own homework. This due diligence is your best defence against a poor investment. It’s a non-negotiable part of the process, and it puts the power back in your hands.
Once your due diligence is complete and you’re confident in the numbers, you can apply now to secure your funding and move forward with confidence.
The ACCC’s new rule is a step in the right direction, but it’s only a starting point. The real responsibility for verifying a franchise’s viability rests with you, the buyer. A true ‘reasonable return’ is one that pays you a proper salary, repays your initial investment, and delivers a profit premium that genuinely justifies the risk you’re taking.
Calculating your target franchise ROI Australia is the most important step you can take. With thorough due diligence, a clear financial goal, and a fast, flexible financing partner, the path to successful business ownership is achievable. Explore how fundU can help you on your journey.
