As of January 1, 2026, the Australian franchising sector is navigating the most significant regulatory overhaul in a decade. With the final “Phase 2” of the 2025 Franchising Code reforms now in full effect and the ACCC’s new mandatory merger regime live, the cost of “getting it wrong” has never been higher.

1. The ACCC’s New “Gatekeeper” Role in M&A

The headline change for 2026 is the Mandatory and Suspensory Merger Control Regime. Previously, many franchise acquisitions were conducted under an informal, voluntary clearance process.

The New Thresholds: Under the new laws effective this month, any franchise group with a combined Australian turnover exceeding $200 million must now formally notify the ACCC of proposed acquisitions. For “very large” acquirers (turnover above $500 million), the notification threshold for a target business drops to just $10 million.

Failure to notify is no longer a slap on the wrist—penalties now reach up to $50 million or 30% of annual turnover, and any deal completed without clearance is legally void.

(Source: ACCC Mergers and Acquisitions Portal)

2. The “Reasonable ROI” Mandate (Section 44)

Since the transition period ended in late 2025, all new, renewed, or extended franchise agreements must now explicitly provide the franchisee with a “reasonable opportunity to make a return on investment” during the term.

• What this means: While not a guarantee of profit, the ACCC is now scrutinizing agreements where the term is too short to allow a franchisee to recoup their initial capital outlay.

• The Action Item: Franchisors must now document their “commercial fairness” logic, showing how the length of the agreement and the expected margins align with the required investment.

3. Mandatory Early Termination Compensation

The 2026 legal landscape provides unprecedented protection for franchisees if a franchisor exits a market or changes its distribution model (e.g., moving from a retail franchise to an online-only model).

Under the updated Code, if a franchisor terminates early for “rationalization” reasons, they are now legally required to compensate the franchisee for:

• Unamortized capital expenditure requested by the franchisor.

• Lost profit and loss of opportunity to sell established goodwill.

• The cost of winding up the business.

4. “Specific Purpose Funds”: The Death of the Generic Marketing Fee

The term “Marketing Fund” has been replaced by “Specific Purpose Fund”. Franchisors can no longer use these funds as a general slush fund for corporate overheads.

• Separate Bank Accounts: These funds must be held in a separate, dedicated account.

• Transparency: Franchisors must provide detailed financial statements within four months of the end of the financial year.

• Auditor Oversight: If a fund exceeds the $0 threshold, it generally requires an independent audit, giving franchisees more power to see exactly where their “2% marketing levy” is going.

2026 Compliance Summary Table

(Source: Guidance on Changes to the Franchising Code)