Buying a franchise
Is franchising right for you?
Buying a franchise may be a fast way to get into a small to medium business with good brand awareness and credibility. However, you need to be wary of potentially large capital outlays, ongoing royalty fees and advertising levies.
Think about the following questions to help you decide:
Do you understand the franchise as a whole?
- What's the franchisor's track record (financial and management)?
- How are existing franchisees performing?
- How many franchisees are there?
Are you clear about the terms of the contract?
What are the renewal and termination Terms and Conditions?
Do you need finance?
Can you obtain finance or are you financially able to purchase the franchise?
How do you grow and protect your wealth?
- What are the plans for expansion and growth?
- How much control do you (and the franchisor) have?
Do you have the right financial management skills?
- What kind of training, education and support is provided?
- Do you fully understand their business systems?
What are your obligations as an employer?
Have you considered your superannuation obligations towards your staff?
How do you see your work/life balance?
- Are you suited to the industry (physically, educationally and emotionally)?
- Are you comfortable with the franchise, their products, services, brand and image?
- Have you considered the impact on your family, future and future security?
- Do you see your investment in a franchise as a long term commitment?
Before buying, remember to do your homework.
The Franchise Agreement and Disclosure Document
Details of any franchise must be contained in the Franchise Agreement and Disclosure Document, which should be reviewed by your legal adviser and accountant or both. The agreement outlines the scope of the relationship, terms, territorial exclusivity arrangements, performance criteria and training obligations.
The Franchising Code of Conduct
In 1998, the federal government introduced a mandatory Franchising Code of Conduct that provides a cooling-off period as well as making sure the franchisor discloses all material matters. A dispute resolution process is also set down in the code.
Do you want more information?
Talk things over with your state's Franchising Specialist or visit the Franchise Council of Australia.
