BFAs When One Partner Owns A Franchise

A binding financial agreement can decide who keeps a franchise if the relationship ends, what the other partner receives instead, and who carries the loans and guarantees behind it. What it cannot do is bind the franchisor.

The franchise agreement and the Franchising Code still control who is allowed to hold the franchise, so a BFA has to be written to work alongside both rather than over the top of them.

An agreement drafted for business owners will not always account for that, because a franchise is not a business you simply own and sell as you please.

It is a contract that permits you to trade under someone else’s system, usually for a limited term, with a third party who gets a say in who takes over from you.

How Does a BFA Deal With a Franchise Your Partner Owns?

A BFA deals with a franchise by recording what each partner keeps and what each partner gives up, so the franchise is quarantined from a property settlement and the other partner receives compensation or a different share of the remaining assets.

It does this by describing the franchise interest, fixing how it will be treated on separation, and setting out the payment, asset swap or timetable that goes with that treatment.

The agreement operates between the two of you as a contract under the Family Law Act 1975, which is why it can override the property division a court would otherwise order. That last point is the whole reason people sign one.

Without an agreement, whatever interests you each hold in the franchise and the entity behind it fall to be identified and divided in a property settlement, and the value becomes a matter for negotiation, valuation evidence and, in the worst case, a judge.

What Can a BFA Actually Control?

A BFA can control the ownership of the franchise interest, the value attributed to it, the treatment of any growth in that value during the relationship, and how the other partner is paid out.

It can say that the franchise, the entity holding it, and any distributions from it remain the property of one partner.

It can also deal with the debt behind the franchise, which matters where the purchase was funded with a business loan secured against the family home.

Where the franchise is one part of a wider asset base, the agreement can trade it off against something else, such as the equity in the home or a superannuation split, although splitting superannuation has its own statutory requirements and is not treated like an ordinary transfer of an asset.

The agreement can also cover things that do not exist yet. If your partner plans to buy a second or third site, the BFA can set out how those future outlets are treated, which saves you renegotiating every time the network grows.

What Can a BFA Not Control?

A BFA cannot by itself force a franchisor to accept a new franchisee, release a guarantee, or approve a transfer, because the franchisor and the lender are not parties to the agreement. That is the single most important limit to understand.

You can write “the wife will transfer the franchise to the husband” into a BFA, and the franchisor can still refuse consent to that transfer if the husband does not meet its selection criteria.

The same applies to bank guarantees and personal guarantees. If both of you guaranteed the franchise loan, the lender is entitled to hold both of you to that guarantee no matter what your BFA says between yourselves.

The usual workaround is an indemnity clause, where the partner keeping the franchise promises to repay the other if the lender ever comes after them, backed by an obligation to apply for a release of the guarantee within a set period.

An indemnity is a promise, not a shield, so it is only as good as the person giving it.

Does the Franchise Have to Be Owned Personally for a BFA to Cover It?

No. A franchise can be held in your own name, through a company, or through a company acting as trustee of a family trust, and the structure changes what the agreement needs to describe.

Where a company holds the franchise, the company is a separate legal owner, so the interests your BFA needs to deal with are usually the shares, any loan accounts between you and the entity, and any rights either of you hold under related agreements.

Where a discretionary trust sits behind the company, the analysis gets harder, because a trust interest is not owned in the same way a share is.

A court can treat trust assets as property of the parties in the right circumstances, though whether it does turns closely on the facts of the particular structure.

In Kennon v Spry [2008] HCA 56, the High Court held that trust assets could be property of the parties to the marriage, with French CJ finding that “for so long as Dr Spry retained the legal title to the Trust fund coupled with the power to appoint the whole of the fund to his wife and her equitable right, it remained, in my opinion, property of the parties to the marriage for the power conferred on the Family Court by s 79.”

That result rested on a combination of factors, including legal title, the source of the trust assets, the power of appointment and the wife’s equitable right to due consideration, so it is not a general rule that every trust controlled by one partner is available in a property settlement.

A BFA that only names the franchise and ignores the entity holding it leaves an obvious gap. Describe the company, the shares, the units or trust interests, the loan accounts, and the franchise agreement itself, so there is no argument later about what was covered.

Why Is a Franchise Harder to Value Than an Ordinary Business?

A franchise is harder to value because you do not own the brand, the term is usually limited, and renewal is not guaranteed, so a large part of what makes the business profitable is not actually yours to keep.

An independent operator builds a brand they can protect and keep, and can trade under it for as long as they like.

A franchisee trades under someone else’s brand and system for a limited term, and while a franchisee can build real goodwill in their own business, a share of what makes it work belongs to the franchisor.

Two franchises with identical turnover can be worth very different amounts if one has eight years left on its term and the other has eighteen months.

The ACCC states plainly that a franchise agreement “doesn’t have to be renewed or extended when it ends” and that this will depend on what is in the agreement.

The same guidance notes that “there is usually very limited ability for a franchisee to end the agreement early”, which cuts the other way as well.

A partner who wants out of the business on separation may find they cannot simply walk away from the obligations that come with it.

How Should the BFA Handle Valuation?

The BFA should set a valuation method rather than a dollar figure, because a fixed number written today will be wrong by the time anyone needs to use it.

A common approach is to name an agreed class of valuer, such as a forensic accountant accredited in business valuation by their professional body, and to set out how that person is appointed and paid if the two of you cannot agree on one.

Another approach is to fix a formula, such as a multiple of maintainable earnings with defined adjustments, though formulas can produce odd results when trading conditions change. Some agreements use both, with a formula as the default and a valuer as the tiebreaker.

Whichever route you choose, deal with the date of valuation. A franchise valued at separation and a franchise valued two years later at final settlement can be very different businesses, particularly if one partner has kept running it in the meantime.

What Happens to the Value Contributed During the Relationship?

Growth in the value of a franchise during a relationship is easy to argue about later, so a BFA should say expressly how that growth is treated.

Three common options are used.

The agreement can quarantine the whole franchise regardless of growth, it can quarantine the value as at the date of the agreement and share the growth, or it can share growth only where the non-owner partner made identifiable contributions to it.

Quarantining everything is the strongest protection for the owner but the most likely to feel unfair to the other partner later, which matters because an agreement that looks one-sided can become evidence in a later challenge, even though an unequal deal is not invalid on its own.

Sharing the growth is often a more durable compromise, especially where the non-owner partner works in the business, covers household costs so the owner can reinvest, or has guaranteed the borrowings.

What Happens to a Franchise if You Separate Without a BFA?

Without a BFA, the interests each of you hold in the franchise and the entity behind it are dealt with under the general property rules in the Family Law Act, which means valuation evidence, financial disclosure and often a long negotiation.

The court does not simply split the asset down the middle. It identifies each party’s legal and equitable interests in property and their liabilities, assesses contributions, considers current and future circumstances, and then decides what division is just and equitable.

Property rules changed on 10 June 2025, and the Attorney-General’s Department confirms that courts must now consider the effect of family violence on a party’s ability to make contributions, along with whether a party “intentionally or recklessly caused any material wastage of property or financial resources.”

The same reforms moved the duty of disclosure out of the court rules and into the Act itself, requiring parties to provide “all relevant financial information and documents.”

For a franchisee, that duty is heavy going.

Depending on what is in dispute, that can mean profit and loss statements, franchisor reporting, supplier contracts, loan documents, the franchise agreement and the franchisor’s disclosure document, produced and picked over by the other side’s accountant.

Timing is worth thinking about here, because a franchise rarely stays still for the life of a relationship.

The Australian Bureau of Statistics recorded 49,158 divorces granted in Australia in 2025, with a median duration from marriage to divorce of 13.4 years.

Franchise agreements usually operate for a limited term, so a franchise bought during a marriage may well be renewed, transferred or sold before any separation happens.

Franchising is also a bigger part of the economy than most people realise.

The Australian Government’s Independent Review of the Franchising Code of Conduct, reporting in February 2024, put the sector at an estimated 1,144 franchise systems containing 70,735 franchisees, forecast to generate annual revenue of $135.2 billion in 2023 and to provide work for around 522,877 individuals.

Which Exit Route Should Your BFA Plan For?

Your BFA should nominate one of three exit routes as the default and set out how the other two are triggered, because each one carries different consent requirements, funding needs and tax consequences.

The table below compares them across the points that decide which is realistic for your situation.

For some couples, keeping the existing franchisee structure in place is the least complicated route, because it may avoid a transfer and the consent process that goes with one.

The second option is worth planning for where the non-owner partner already works in the business and would realistically pass the franchisor’s selection criteria.

The third option needs the most drafting attention, since a forced sale during a separation rarely attracts the best price and the agreement should say how any shortfall against the agreed value is shared.

Do You Need the Franchisor’s Consent to Transfer the Franchise?

Yes, a transfer of a franchise agreement needs the franchisor’s consent, and the ACCC confirms that “the franchisee must ask for the franchisor’s consent to sell in writing.”

Franchisors cannot unreasonably withhold that consent, but the ACCC sets out some of the reasons a franchisor may refuse, and that list is not the only basis on which a refusal can be justified.

Those reasons include where the buyer does not meet the franchisor’s selection criteria, where the current franchisee has breached the agreement and has not remedied the breach, and where the current franchisee owes money to the franchisor.

The last two are worth thinking about before you separate rather than after.

A franchise that has slipped behind on fees while a relationship was falling apart is much harder to transfer than one with a clean record.

What Happens if the Franchisor Does Not Respond?

Consent is deemed given if the franchisor does not refuse in writing within 42 days, which gives a separating couple a workable timeframe to plan around.

The ACCC explains that the 42 days runs from the later of the date the franchisee asks to transfer the agreement, or, if the franchisor asks for more information, the date the franchisor receives the last piece of that information.

Franchisees can then assume consent has been given, and franchisors “cannot take back their consent in this circumstance.”

Consent given expressly works differently, because the ACCC states that “if a franchisor advises in writing to consent to a transfer, a franchisor may cancel their consent within 14 days of granting it”, provided the franchisor gives written reasons and does not act unreasonably.

The practical lesson is to make the request early and to answer any request for further information quickly, because where the franchisor asks for more information the 42 days does not start running until the last piece of it arrives.

Build the timeframe into the BFA itself, so the agreement gives a realistic window for the consent process instead of a settlement date that is impossible to meet.

Does a Transfer Trigger New Rules for the Incoming Owner?

Yes, a transfer can pull the franchise into the newest version of the Franchising Code, which changes the terms the incoming owner is signing up to.

The ACCC’s guidance on the 2025 Franchising Code changes states that some rules in the new Code “only apply to franchise agreements that are entered into, transferred, renewed or extended, on or after 1 November 2025.”

Those later rules include terms requiring the franchisor to pay fair compensation for certain early terminations, such as where the franchisor withdraws from the Australian market, rationalises its network, or changes its distribution model.

Other rules bite earlier than that, since the ACCC’s guidance on the changes confirms the limits on restraint of trade clauses apply to agreements entered into, transferred, renewed or extended on or after 1 April 2025.

The restraint rules only operate where a series of conditions is met, covering matters such as whether the franchisee sought to extend or renew, gave proper notice, satisfied the renewal conditions, avoided serious breach and misuse of intellectual property, and what compensation for goodwill was available.

There is a second timing point that catches people out.

A person who takes over an existing franchise gets a short cooling-off window, and the ACCC notes that a new franchisee can terminate by written notice by whichever happens earlier of 14 days after becoming the new franchisee, or the day they take possession and control of the business.

How Does Tax Affect a Franchise Transfer Between Partners?

Qualifying transfers made under a binding financial agreement can access the relationship breakdown rollover, which defers the capital gains tax that would otherwise apply when an asset moves from one partner to the other.

The Australian Taxation Office confirms the rollover applies where assets are transferred under a court order or under “a financial agreement that is binding under the Family Law Act 1975.”

Several conditions must be met at the time of the transfer, including that the spouses are separated, that there is no reasonable likelihood of cohabitation resuming, and that “the transfer is for reasons directly connected with the breakdown of the marriage or relationship.”

The rollover does not reach everything either, because it applies to specified CGT events and the ATO confirms there is “no rollover for the transfer of trading stock”, which matters for a franchise carrying stock on hand.

The contrast with an informal arrangement is stark.

The ATO states that “the rollover doesn’t apply if you and your spouse divide assets under a private or informal agreement”, which means a handshake deal over the kitchen table can create a tax bill that a properly drafted agreement would have deferred.

The rollover defers tax. It does not erase it. The partner who ends up holding the franchise inherits the original cost base, so they carry the whole capital gain when the business is eventually sold.

Where that tax is likely to be significant, it is worth looking at the franchise on an after-tax basis when you negotiate, rather than treating a $600,000 business as worth the same as $600,000 in cash.

When Should the BFA Be Signed?

The best time to sign is before the franchise is bought, or before the relationship reaches a milestone such as marriage or moving in together, because signing well in advance reduces the risk of an argument later about time pressure, duress or undue influence.

The Family Law Act allows agreements before marriage, during marriage, and after divorce, with an equivalent set of provisions for de facto couples.

Western Australia is the exception to watch, because de facto property and maintenance matters there run under the state’s own Family Court Act 1997 rather than the federal Act, so the agreement has to be drafted to the right law.

Timing matters for a franchise in a way it does not for a simple asset.

Signing before the franchise agreement is executed means the BFA can describe the intended purchase, the funding, and the guarantees accurately from day one.

Signing afterwards means the agreement has to reach backwards over an asset that already has a history, a value, and, sometimes, contributions from the other partner.

What Makes the Agreement Legally Binding?

An agreement becomes binding when it is signed by both parties, each party received independent legal advice before signing, and each has been given a signed statement from their lawyer confirming that advice was provided.

Section 90G of the Family Law Act requires that “before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement”, and that a copy of the lawyer’s signed statement is given to the other party or their lawyer.

The Act also contains a saving provision, so a court can in some cases declare an agreement binding despite a technical failure to meet those requirements, but that is a remedy to fall back on rather than a plan.

One lawyer cannot advise both of you. Each partner needs their own, and for a franchise that means each lawyer needs enough financial information to give real advice about what is being given up.

There is a further step people forget.

Under section 90DA, the provisions that deal with how property or financial resources are to be divided on breakdown do not take effect until a separation declaration is made, which is a written statement signed by at least one party confirming the parties have separated and that resuming cohabitation is unlikely.

That requirement stops applying where the parties divorce or one of them dies, and it does not affect the rest of the agreement.

What Can Cause the Agreement to Fail?

The circumstances in which an agreement is signed matter as much as the deal it records, because the grounds for setting one aside reach conduct such as duress and undue influence, as well as advice, disclosure and a range of other statutory grounds.

The leading authority is Thorne v Kennedy [2017] HCA 49, where the High Court set aside both a pre-nuptial and a post-nuptial agreement.

The plurality explained that pressure can deprive a person of free choice where it causes that person “substantially to subordinate his or her will to that of the other party”, and found that Ms Thorne signed believing she had no choice and was powerless to do otherwise.

Her own solicitor’s unchallenged evidence was that the terms of the agreements were “entirely inappropriate” and wholly inadequate, and the Court held that Mr Kennedy had unconscientiously taken advantage of the position she was in.

An uneven split is not fatal on its own, since these agreements are often financially unequal, but terms that are grossly unreasonable can be evidence that something went wrong in how the agreement was obtained.

For a franchise owner, the disclosure point is the practical one. If you understate what the business earns, or leave out a second site, a supplier rebate or a pending renewal, you hand the other side a reason to attack the agreement years later.

Give full figures, keep the drafts and the advice, and allow enough time between the first draft and signing that nobody can later say they were rushed.

What Else Should the Agreement Cover?

A BFA over a franchise should deal with the events that will realistically happen during the life of the franchise, not just the day the relationship ends.

Franchise arrangements can change a great deal over a decade, and an agreement drafted around a single site will not fit a couple who own four outlets ten years later.

These are the items most easily overlooked in an agreement involving a franchised business:

• The franchise agreement itself, identified by franchisor, brand, site and expiry date
• The entity that holds the franchise, whether that is a company, a trust, or both
• Any loan accounts between the partners and the entity
• Personal guarantees, including who applies for release and who indemnifies whom
• Additional sites or territories acquired after the agreement is signed
• What happens if the franchisor terminates the agreement or refuses renewal
• Whether the non-owner partner’s work in the business is paid, unpaid, or treated as a contribution
• A review trigger, such as a renewal, a new site, or a fixed number of years

How Does the Non-Owner Partner Protect Themselves?

The non-owner partner protects themselves by getting real information about the franchise before signing, not after, and by making sure the agreement gives them something certain in exchange for what they are giving up.

Ask for the franchise agreement and the franchisor’s disclosure document.

You can also look the franchisor up yourself, because the Franchise Disclosure Register is made available for public inspection and can be searched by franchisor name, trading name, ABN or business description.

Treat what you find there as a starting point rather than a verified account, since the Commonwealth “does not review, vet or endorse any franchisor material prior to its inclusion on the Register” and makes no warranty about its accuracy.

Look closely at anything you have signed personally. If you have guaranteed the franchise loan or the premises lease, you carry a liability that the BFA cannot remove on its own, and the agreement should compensate you for holding that risk.

How Often Should the Agreement Be Reviewed?

There is no legal requirement to review a BFA, but it is worth doing whenever the franchise changes in a material way, because a franchise portfolio can look completely different by the end of a single term.

Renewal is an obvious trigger, as is buying a new site, changing the holding entity, refinancing, or bringing the other partner into the business.

Reviewing does not always mean replacing. Sometimes the existing agreement still works, and the only thing needed is a record of the current position, which can be useful evidence if the agreement is ever tested.

Where the change is substantial, a new agreement that terminates and replaces the old one is usually cleaner than trying to patch the original.

Need Help With a BFA When One Partner Owns a Franchise?

A binding financial agreement can keep a franchise out of a property settlement, but only if it is drafted around the franchise agreement, the Franchising Code, the entity holding the licence and the guarantees sitting behind it.

As binding financial agreement lawyers in Australia, my law firm can prepare an agreement that covers your franchise interest properly, deal with valuation and guarantee issues, and handle the whole process at a transparent fixed fee.

Contact my law firm today by calling 1300-529-888.

Frequently Asked Questions

Can a BFA stop my partner claiming a share of my franchise?

Yes. A binding financial agreement can record that the franchise, the entity holding it and any income from it remain yours, and set out what your partner receives instead. It must be signed by both parties with independent legal advice for each, and it does not by itself bind the franchisor or release a guarantee given to a lender.

Do I need the franchisor’s permission to transfer a franchise in a settlement?

Yes. The franchisee must ask for the franchisor’s consent to transfer in writing. Franchisors cannot unreasonably withhold consent, but may refuse for reasons including that the incoming owner fails their selection criteria, an unremedied breach, or money owed. Consent is deemed given if the franchisor does not refuse in writing within 42 days.

How is a franchise valued for a binding financial agreement?

A franchise is typically valued by a forensic accountant using maintainable earnings, adjusted for the remaining term, renewal prospects and how much of the profit depends on the owner’s personal work. Because values move, many agreements set a valuation method and appointment process rather than a fixed dollar figure that dates quickly.

Does transferring a franchise to my partner trigger capital gains tax?

Not immediately, if the transfer qualifies for the ATO’s relationship breakdown rollover under a binding financial agreement. The parties must be separated, with no reasonable likelihood of cohabitation resuming, and the transfer must be directly connected with the breakdown. The rollover does not cover trading stock, and the receiving partner inherits the original cost base.

What happens to the franchise if the BFA is set aside?

The interests each of you hold in the franchise and the entity behind it are then dealt with under the general property provisions of the Family Law Act. That means valuation, financial disclosure and negotiation or litigation. Common grounds of challenge include pressure, inadequate independent legal advice, or non-disclosure of material financial information.

Should the BFA be signed before or after buying the franchise?

Before, wherever possible. An agreement signed before the franchise is purchased can describe the intended entity, funding and guarantees accurately, and signing well ahead of any deadline reduces the risk of a later argument about pressure. Signing after the purchase is still worthwhile, but the agreement must then deal with an existing value and contribution history.