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Owning a franchise can be a great way to run your own business with support and security from a broader business network.
Is a franchise the right fit for you?
Before buying a franchise, consider your wants and needs, your strengths and limitations, your skills and passions and most of all, your ultimate goal. This will help you determine if a franchise if the right fit for your character, circumstances and goals.
One of the biggest advantages of purchasing a franchise is that the products and services are already publicly available and hence have been tried, tested and advanced as needed. This means you don’t need to spend the time and energy establishing procedures and systems as it’s all been done by the franchisor.
The branding will also be recognised so consumers will not hesitate to interact with the business as they already know the products and services. This means you don’t need to worry about promoting an unknown product or business name.
Another advantage is that franchisors will normally provide training, support and assistance to help you get the business up and running. You also have a sound board and support along the way.
Costs is something on everyone’s mind when opening a business and one disadvantage of buying a franchise is the significant costs. Although the total costs vary depending on the franchise, location and other factors, the initial expense is usually quite large. You will also need to consider ongoing fees such as royalty payments, which can be a fixed amount or percentage.
Another disadvantage is that you will lose some of the independence that comes with owning a business as franchises are normally quite strict about procedures and appearance which will limit new ideas and experimenting.
Although it may not be common, another consideration is that your business reputation and profitability can be threatened by damaging actions of other franchises in the same brand.
Franchising Code of Conduct
“The Franchising Code of Conduct is a mandatory industry code of conduct that has the force of law under the Trade Practices Act 1974. The Franchising Code regulates the conduct of franchisees and franchisors, with the aim of ensuring that franchisees are sufficiently informed about a franchise before entering into it.
The code also provides a cost-effective dispute resolution scheme for franchisees and franchisors to resolve any disputes. The Australian Competition and Consumer Commission (ACCC) ensures compliance with the code and the Act by informing franchisors and franchisees of their rights and obligations under the code and enforcing it where necessary.” (Source: Overview of the Franchising Code of Conduct – www.accc.gov.au)
Purchasing a franchise certainly has some advantages however it doesn’t guarantee success. It is important to do your research first and carefully evaluate the advantages and disadvantages before signing any contracts.
If you decide that a franchise if the right fit for, you will need to obtain the franchisor’s disclosure document at least 14 days before you sign any agreement or contract. Carefully read and understand the disclosure document as this will set out the costs, background of the business, any restrictions and what training and support will be provided which will have a significant influence on your business down the track. Make sure to ask questions if you don’t fully understand any portion of the document.
For more information, read The Franchisee Manual available at www.accc.gov.au under ‘Publications’.
If you are a franchise owner who needs help with your tax or business needs, contact Acumon today on 49311100