Changes to card payment surcharges are coming, and there has already been plenty of discussion about what businesses will need to do to prepare. 

But for franchisors, there’s another question worth asking: What happens to your royalties? 

From 1 October 2026, changes to card surcharging are expected to mean businesses can no longer add a separate surcharge when customers pay by eftpos, Mastercard or Visa. Instead, card-processing costs may need to be factored into the price customers see. 

That might sound like a relatively simple pricing change, but if your franchise system calculates royalties as a percentage of Gross Revenue, it could have a flow-on effect. 

First things first: check your Gross Revenue definition 

Most franchise agreements calculate royalties by reference to Gross Revenue. 

Gross Revenue definitions tend to be deliberately broad. They might capture all revenue, receipts and income generated from operating the franchised business, with only specific amounts, such as GST or refunds, carved out. 

So, what happens when a card-processing cost that was previously shown separately is rolled into the price of a product? 

It may simply become part of the sale proceeds. And if those sale proceeds form part of Gross Revenue, your royalty percentage may apply to that amount too. 

For an individual transaction, we’re probably talking about cents. Across an entire franchise network over a year? That’s where it becomes worth paying attention. 

Does that mean you need to change your Franchise Agreement? 

Not necessarily. 

Before reaching for the red pen, work out what is actually happening in your network. 

How are your franchisees currently reporting card surcharges? Are they included in Gross Revenue or separately identified? Are merchant-processing fees treated as an operating expense? And does your Operations Manual already tell franchisees how these amounts should be reported? 

For some franchise systems, the answer may be: do nothing. 

If franchisees already report the full amount charged to customers as revenue, while merchant-processing fees sit separately as an operating expense, your existing Gross Revenue definition may already produce the result you want. 

In that case, it may simply be worth making the position clear in your Operations Manual so everyone in the network is working from the same playbook. 

For other systems, the change may highlight a gap between what the Franchise Agreement says and what actually happens in practice. 

That’s when it may be time to take a closer look at the drafting. 

And while you’re there… check your Disclosure Document 

This isn’t just a Franchise Agreement issue. 

If the changes affect the way royalties, fees or operating costs work within your franchise system, consider whether that has a flow-on effect for your Disclosure Document too. 

The aim is pretty simple: your Franchise Agreement, Disclosure Document, Operations Manual and actual reporting practices should all line up. 

If they don’t, now is a good time to fix it. 

What should franchisors be doing? 

Don’t wait until the changes kick in to work out how your network is going to deal with them. 

Take a look at: 

• your definition of Gross Revenue; 

• how franchisees currently report card surcharges; 

• how merchant-processing fees are treated; 

• what your Operations Manual says; 

• whether your current royalty calculation will change; and 

• whether your Disclosure Document needs an update (Before Oct 31^st!). 

The card surcharge changes might not require you to change anything, but that’s something worth confirming now, rather than finding out after the new rules are already in place. 

Not sure how the changes interact with your franchise documents? Have a chat with the BDC Law team. We can review your Gross Revenue definition, reporting position and franchise documents and help you work out whether anything actually needs to change.