Thinking about Buying a Franchise?
Guidelines
In Australia today there is a franchise operating in almost every type of business category, with varying levels of complexity and cost.
Prior to buying a franchise, potential franchisees should do the following;
- Assess your own reasons for wanting to own a business;
- Assess the lifestyle and income implications of owning and operating a business;
- Assess the franchise opportunities consistent with 1 and 2 above.
- Build your understanding of the franchise relationship by reading the Australian Franchising Handbook, published by Richard Evans.
- Narrow your franchise search to a few systems, then request further information.
- If appropriate, and you are comfortable with the decision, select a system and commence the application process.
- Ensure you have adequate borrowing capacity, including working capital, to successfully establish this type of business.
- Be sure you receive and evaluate all disclosure material during the application process.
- Be sure you receive legal and accounting advice from lawyers and accountants with franchise experience before making any final commitment.
- Use the cooling-off period to check your facts and figures and determine if you still want to proceed.
This is by no means an exhaustive list of things you should consider prior to buying a franchise, but if you work through these 10 steps you will be at less risk of rushing headlong into a hasty and ill-informed decision.
Franchise Costs & Fees
In all business format or package franchise programs, franchisors directly or indirectly collect payments from franchisees for the right to use their brand and to participate in their systems. Franchise fees can range in price (for up-front franchise fees and set-up) from as little as $5,000 to as much as $1 million, or more. Typically, franchisees are also required to pay ongoing fees for franchise support, which may be a fixed monthly amount, or calculated as a percentage of turnover.
Fixed monthly amounts may range from $50 per month up, while percentage fees may range from 2% to as much as 15%. Additionally, a further fixed or percentage of turnover fee may be applied to cover the costs of group marketing.
Get Advice
It is always essential that anyone considering becoming a franchisee receives competent professional advice from qualified and experienced advisors. The FCA can direct potential franchisees to accountants and lawyers who are members of the Council and who understand franchising, which is a specialist field of practice. A comprehensive list of service providers is available on the Franchise Business Directory.