What You Need to Know Before Buying a Franchise
It is very satisfying to work for yourself so when you decide to take the plunge and go into business for yourself it makes sense to investigate the differences between a regular business and a franchise.For anyone who has aspirations to run their own business, franchising is a relatively low risk stepping stone for employees wanting to become their own boss.
The most compelling argument for a franchise is the reduced risk as you are buying into a brand and model that has been successful over a period of time. Other typical benefits include: support from a head office; training; ongoing support; a defined business model; access to a strong customer market; a niche product or service; sales and marketing assistance; franchise mentoring. Also, there are significant benefits from being in a network of likeminded people.
For those wishing to operate a franchise you need to realise that the franchise owner is looking for a partnership. They will not necessarily take on anyone that knocks on their door with adequate funds. Because of the investment involved, franchise owners seek passionate, motivated people that can follow the franchise systems. Other criteria may include a proven financial track record, a clear business plan and a succession plan.
Once you have weighed up the options it is wise to understand what you are getting yourself into before signing on the bottom line, so investigate what courses on franchising are available or what local expertise you can tap into. The government runs a number of courses including:
- Complying with the Franchising Code of Conduct
- Entering into a franchise agreement
- Understanding your tax obligations
- Resolving franchising disputes
- Buying a franchise in your state or territory
Although buying into a franchise reduces your start up risk and provides numerous advantages it is not a guarantee of success. Although there are many successful franchise stories there are many stories that would urge caution. Before entering into any franchise arrangement perform ‘due diligence’ by investigating your options, talking to your professional advisors, seeking testimonials and the support of your family. To help we have included a quick quiz to help you decide if franchising is for you.
- Are you ready to manage your own business?
- Will you enjoy the franchise?
- Are you willing to follow the franchisor’s system?
- How good are your people skills?
- Can you afford the franchise?
- Have you carefully studied the legal documents?
- Is the franchise you are considering successful?
- Are the franchisees generally happy and successful?
- Can you work with the franchisor’s staff?
- Do you have family support?
Richard Kemp – Watts Price Accountants
The advice provided on this Article is general advice only. It has been prepared without taking into account your objectives, financial situation or needs.