Many Australians who dream of being out on their own as a small business owner consider the option of buying into a franchise.  Dennis Martin, Director with Snedden Hall & Gallop Lawyers, has assisted numerous franchising businesses – both from the perspective of the franchisor and the franchisee. Here, in part 2 of a 3 part series on franchising in Australia, Dennis, discusses what a potential franchisee must consider to make the jump to being a successful small business owner.
In Part 1, we looked at the franchisor’s world; and
In Part 3, we look at the regulations that govern franchising.

What is a franchise?

Very loosely, a franchise enables you to start a business without having to start from scratch.
The franchisor, has worked out policies, procedures, marketing materials, advertising and training programs. How hard can it be?

Your homework

The primary and constant criteria is to do your homework about what franchise you would like to be involved with and which franchisor system might best fit you.
Comprehensive due diligence will pay in the end even if it results in a decision not to proceed.
Only when your checklist allows you to confirm that the franchise system of your chosen franchisor is reliable, should you proceed.
There are a number of special areas for consideration:

  • Financial stability of the franchisor.
  • The franchisor’s reputation to date.
  • Does it have comprehensive manuals, training and online support?
  • Can it introduce you to start-up capital?
  • The experience of other franchisees in the system.

Assuming you are not being asked to be the guinea-pig franchisee most likely you will be entering a proven system, hopefully with a content group of franchisees.
Feedback from current franchisees is one of the most valuable assets you can tap into. Do they believe they received proper training, are they receiving suitable support and are their views heard? Any franchisor who resists or seeks to control the information its franchisees wish to make to prospective franchisees should signal concern.
Have you sought in depth assistance from your legal and accounting adviser? This will alert you to many issues you may not have considered.
These include the need for not just adequate capital but reserves. Most small businesses fail because of too little available capital.
What is your Plan B for emergencies if systems fail or key personnel leave or become ill? The list goes on.

How can Snedden Hall & Gallop assist?

If you are considering buying a franchise, please contact Dennis and our experienced Business Team for advice on the best way to proceed. You can contact us for any franchising matter by phone on (02) 6285 8000 or by email.

Further reading

This is the second in a three-part blog series on franchising in Australia. Whilst buying a franchise can be a fantastic option, there are things you need to know about your rights and obligations under the Franchising Code of Conduct. So have a look at Part 3: The regulatory environment as well as Part 1: The Franchisor.