Buying a Franchise

It can be exciting to think of one day owning your own business. One way to be your own boss is through buying a franchise. There can be benefits in owning a franchise, but there can equally be some disadvantages. It is therefore crucial that you undertake the following steps before buying a franchise.

1. Research: It is important that you research franchise opportunities to find one that suits your interests, skills, work capacity and most importantly your financial capacity. It is a good idea to look at any potential franchises market demand, brand reputation and what support can be provided from the franchisor. It’s always beneficial to talk to other current franchisees to see what their experiences have been. It can be particularly helpful to talk to people who are no longer franchisees to understand why they are no longer a franchisee and hear about their experiences.

2. Due Diligence: Conducting due diligence is crucial before buying any business. This is particularly the case for franchisees. This includes looking at the franchisor’s disclosure document and any other financial statements to assess the profitability of the business. It also helps you to identify any potential risks in purchasing a franchise. 

3. Financing: Work out your finances. Consider how much you will need to purchase the franchise. Do you have enough personal savings, or do you need to consider a loan or other financing options? It is vital that you work out how much you need for the initial investment and any ongoing costs thereafter.

4. Location: Consider what location is suitable for your franchise. Are there any other similar businesses in the area? Are there any franchisor’s guidelines that you need to consider when setting up your franchise?

5. Training and Support: Does the franchise offer any ongoing training and support to the franchisee and if so, how much?  This can help you understand the business model and operations of the franchise.

6. Ongoing Management:  Consider how you will manage and grow the franchise including your ongoing relationship with the franchisor and even other franchisees.

7. Operations: Consider the franchisor’s operational standards and how you will build a customer base.

8. Franchise Agreement: Make sure you thoroughly review the franchise agreement. The franchise agreement will set out the legal contract between you and the franchisor, including the terms and condition of the franchise, fees, obligations and the duration of the agreement.

9. Compliance and Regulations: Ensure that the agreement and any other documentation complies with relevant laws and regulations, including the Australian Franchising Code of Conduct.

10. Financial and Legal Advice: We recommend that you seek taxation, financial and legal advice before you enter into any agreement.

Please contact us for a free thirty-minute consultation with a lawyer that specialises in franchises.

Any information on this website is general in nature and should not be taken as personal legal advice. We recommend that you speak to a lawyer about your personal circumstances.

Photo by Antoni Shkraba: