Further Guidance on the Reasonable Opportunity for Return on Investment

Since 1 November 2025, the ACCC has provided further guidance on the changes that have been made to the Franchising Code of Conduct, including as to the new Code rules for making a return on investment.

The ACCC’s recent guidance on the new “reasonable opportunity to make a return on investment” requirement is well-intentioned — but in practice, it leaves franchisors navigating a compliance landscape that is far from settled. While the amendments aim to drive better transparency and more realistic expectations around franchise profitability, the guidance stops short of offering the clarity the sector urgently needs.

What is a Reasonable Opportunity?

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

Return on investment (ROI) means the franchisee should be able to recover the upfront costs (e.g., franchise fees, fit-out, equipment) and still make an ongoing profit.

According to the ACCC, a “reasonable opportunity” means “what a typical person would see fair and reasonable” based on factors including:

• The duration of the agreement;
• The terms and conditions of the agreement;
• The business model;
• The amount of investment required from the franchisee;
• The type of business;
• Location;
• Ongoing costs and fees;
• Economic conditions;
• Regulations
• Competition;
• The skills and resources of the franchisee;
• The level of support provided to the franchisee; and
• The length of the agreement.

Whether the franchisor will have provided a reasonable opportunity to make a return on investment will be subjective depending on the terms of the franchise agreement.

How Franchisors can provide a reasonable opportunity

The ACCC notes that franchisors should ensure that the duration of franchise agreement is “fair and reasonable”, and long enough to allow franchisees to recoup their investment.  This may involve considering:

• Is the capital investment appropriate when considering the business model, and the franchisee’s ability to recoup capital investment over the duration of the agreement?
• Are there any matters about the franchised business which are not usual business practice in the sector?
• Does the business model provide an accurate reflection of the profit that is reasonably attainable?
• What are the initial costs and ongoing costs that a Franchisee is required to account for?
• What are the costs and profits of the franchisor owned franchised businesses?
• Are the fees and profit margins appropriate considering the business model?
• Is the market already saturated, and therefore difficult for a franchisee to make a profit?
• Does the Franchisee meet the selection criteria for the franchised business?
• Does the Franchisee have the necessary skills and experience required to run the franchised business?

The ACCC then provided some fairly broad examples of where it is and is not likely that a reasonable opportunity has been provided.

However, in our view, the guidance reads more like a “good practice” document as opposed to a compliance standard.  It does not seem to answer key questions such as:

• Must every individual franchisee be able to achieve a reasonable ROI, or is it enough that an average performer could?
• Can franchisors rely on historical network data, or must projections be bespoke for each site/territory?
• How should franchisors treat outlier results (e.g., franchisees with low performance due to personal factors)?
• What metrics must franchisors actually provide to a prospective franchisee?

Without answers, franchisors are left interpreting obligations through risk appetite rather than clear regulatory expectations.

Conclusion: The ACCC’s intent is clear — but the pathway is not

The ACCC has told franchisors what they must achieve — giving franchisees a reasonable opportunity to make a return on investment — but it has not told them how to do it.

This places franchisors in a legally risky environment where conservative, evidence-based modelling and transparent disclosure become essential.

To view the ACCC’s guidance on the new Code changes, see: Guidance on changes to the franchising code | ACCC.

If you need assistance with updating your agreements and disclosure documents to be in line with the new Code requirements, please contact our experienced Franchise Lawyers.