You will spend weeks on the disclosure document, the financials and the franchise agreement. Almost nobody spends two hours on the roof, the slab and the exhaust canopy. That gap is where the unbudgeted money goes.
The checklist everyone runs, and the one nobody does
Ask any franchise adviser for a due diligence list and you will get a good one. Read the disclosure document properly. Have the franchise agreement reviewed by a lawyer who does franchising for a living. Speak to current and former franchisees, not just the ones head office introduces you to. Get an accountant to stress test the earnings. Understand the territory, the marketing fund, the supply arrangements and what happens at renewal.
Every item on that list is about the business. Not one of them is about the physical building you are about to occupy for the next five to ten years.
That matters more than it used to. Under the Franchising Code of Conduct that took effect on 1 April 2025, franchisors face expanded obligations to disclose significant capital expenditure, including the rationale, timing, cost, benefits and risks of works a franchisee may be required to carry out. That is a real improvement for buyers. But it tells you what the franchisor will ask you to spend. It tells you nothing about what the building will ask you to spend.
The building always asks.
Three obligations most first time franchisees underestimate
Repair and maintenance. Commercial and retail leases push a long list of maintenance items onto the tenant. Air conditioning servicing, grease trap pump outs, exhaust canopy cleaning, hot water units, roller doors, pest control, sometimes the hot water service and the shopfront glazing. Each one is small. Together they are a line item you should have budgeted before you signed, not discovered in month four.
Make good. At the end of the term you will usually be required to return the premises to their original condition, or to base building condition, or to whatever the clause actually says. Removing a commercial kitchen, patching a slab, reinstating a ceiling grid and making good the services can run well into five figures. Franchisees routinely reach the end of a lease with no provision made for it, because nobody costed it at the start.
Compliance. Once you occupy the premises, you are usually the person with management or control of a workplace, and a set of building compliance duties comes with that. More on those below.
There is some statutory protection, and it is worth understanding its limits. In Victoria, section 52 of the Retail Leases Act 2003 requires the landlord to maintain the structure, fixtures, plant and equipment in a condition consistent with their condition when the lease was entered into. Read that carefully. It protects you against deterioration during your term. It does not oblige a landlord to fix what was already failing on day one, and it only helps you at all if you can prove what condition the premises were in when you took them. Which brings us to the practical point.
Three moments where an inspection pays for itself
1. Before you sign the lease or the resale contract
A condition and defect inspection of the premises, done before you are committed, gives you three things: a realistic maintenance budget for the term, a list of items to negotiate onto the landlord or the outgoing franchisee before you have lost your leverage, and a factual basis for asking whether the rent reflects the state of the building.
This is the single highest value hour in the process, and it is the one most often skipped, usually because settlement is close and the inspection feels like a delay. It is not a delay. It is the last moment you can still walk away cheaply.
2. The day the lease starts
Get a dated photographic condition report before you take possession, covering the shell, the slab, the roof, the services and the existing fit out. This is the document that decides make good disputes five years later. Without it, the argument at the end of the term is your memory against the landlord's, and the party with the report tends to win.
The same applies if construction starts next door or above you during your term. A dilapidation report taken before the neighbouring work begins is how you establish that the new cracking in your shopfront was not there before the excavator arrived.
3. At handover of your fit out
If the franchisor's nominated builder is fitting out your site, do not sign off and release the final payment on a walkthrough. Have the works independently inspected against the drawings and the specification, and issue a written defect list before the final progress claim is paid. Waterproofing under a commercial kitchen, floor falls to wastes, exhaust canopy make up air, drainage and slab penetrations are all far cheaper to correct while the builder is still on site and still owed money.
Franchisees are often told the fit out is the franchisor's arrangement and therefore not their concern. If you are paying for it, and you are the one who lives with it, it is your concern.
What tends to go wrong, by format
Food and hospitality. Failed waterproofing under kitchens and cool rooms, floor wastes that do not fall correctly, undersized or non compliant exhaust canopies, grease affected drainage, and mould behind splashbacks and in ceiling voids. Health inspections find the symptom. A building inspection finds the cause.
Retail. Roof leaks that only appear in driving rain, end of life air conditioning that becomes yours the week after you sign, shopfront glazing and awning defects, and accessibility non compliance at the entry.
Gyms and health. Slab loading for free weights and rigs, acoustic and vibration transfer to neighbouring tenancies and to residential above, ventilation rates, and wet area waterproofing in change rooms.
Childcare, medical and allied health. The compliance load is heaviest here. Access, egress, fire separation and essential safety measures all sit close to the surface, and a defect can stop you trading rather than just cost you money.
The compliance items that quietly become yours
Annual fire safety certification. Every state runs a version of this under a different name. Victoria has the annual essential safety measures report, New South Wales the annual fire safety statement, Queensland the occupier's statement. Exit signs, emergency lighting, fire doors, detection, extinguishers and evacuation systems all have to be maintained and certified, and leases very often make that the tenant's cost.
Accessibility. Premises open to the public are subject to the Disability Discrimination Act. A step at the entry, a non compliant ramp gradient or an inaccessible toilet is both a legal exposure and a rectification cost, and it is far better identified before you sign than after a complaint.
Asbestos. For workplaces in buildings constructed before 31 December 2003, work health and safety law requires an asbestos register to be prepared and maintained by the person with management or control of the workplace. In many tenancies that is the franchisee. Ask to see the register before you sign. If nobody can produce one, that is information in itself, and it is a live issue the moment you start cutting into walls for a fit out.
Buying an existing site is not the safer option
There is a common assumption that a resale is lower risk than a greenfield site because the fit out already exists and the site already trades. On the building side the opposite is often true. With a resale you inherit an ageing fit out, whatever maintenance the outgoing franchisee deferred, and in practical terms their share of the make good liability at the end of the term. Equipment that is five years into a seven year life does not show up in the profit and loss you are being shown.
Inspect a resale at least as carefully as a new site. Then price what you find into your offer.
What to ask for, and what it costs
Engage an independent building consultant, not the landlord's agent and not the franchisor's builder. The report should be written, photographed, and specific enough to hand to a lawyer or a tribunal. For franchise premises the useful scopes are a commercial condition and defect inspection before you commit, a dilapidation or photographic condition report at the start of the lease, and a defect inspection at fit out handover.
Practically, a small retail tenancy takes two to three hours on site with a report back within a few days. Larger or more complex sites take longer. Against a fit out that runs into the hundreds of thousands and a lease that commits you for years, it is one of the smallest numbers in the whole transaction, and the only one that reliably tells you what you do not yet know.
Nobody regrets the report they commissioned. Plenty of franchisees regret the one they did not.
About the author
Maison Azdari is Co-Founder and Senior Building Consultant at Owner Inspections, and appears as an expert witness in building disputes.
Owner Inspections carries out independent commercial and retail property inspections, dilapidation and condition reports, fit out defect inspections and expert witness reports across Australia, with offices in Sydney, Melbourne and Brisbane. Reports are written by licensed building consultants and delivered in plain English.
Thinking about a franchise site? Have the premises checked before you sign. Book a commercial property inspection or a condition report at ownerinspections.com.au/commercial-property-inspections, or call 1300 471 805 for a no obligation discussion about your site.
