Franchising in Australia

Franchising in Australia

In Australia today there is a franchise operating in almost every type of business category, with varying levels of complexity and cost. National franchising regulations exist which are designed to protect franchisees and to increase the amount of information available to them before buying a franchise. However, no amount of regulation will prevent people from making uninformed decisions. The following steps will assist in making an informed decision.

Prior to buying a franchise, potential franchisees should follow these 10 steps:

1. Assess your reasons for wanting to own a business;
2. Assess the lifestyle and income implications of owning and operating a business;
3. Look for franchise opportunities that meet the above two requirements (there are a number of online franchise directories which list franchises for sale in Australia);
4. Build your understanding of franchising by reading books on the subject (available in most large bookstores);
5. Refine your franchise search to a few systems, then request further information;
6. If appropriate and you are comfortable with the decision, select a system and commence the application and your due diligence process;
7. Ensure you have either sufficient capital or adequate borrowing capacity, including working capital, to successfully establish this type of business;
8. Be sure you receive and evaluate all disclosure material during the application process;
9. Be sure you receive legal and accounting advice from lawyers and accountants with franchise experience before making any final commitment;
10. Use the cooling-off period to check your facts and figures and determine if you still want to proceed.

This is not an exhaustive list of things to consider prior to buying a franchise, but working through these issues will reduce the risk of rushing into a hasty and ill-informed decision.

Background Reading

A visit to any large bookstore or online bookseller will reveal a range of titles on franchising worth considering.

Additionally, the Australian Competition and Consumer Commission (ACCC) have a number of free publications on franchising which can be accessed via their website at www.accc.gov.au, including the Franchising Code of Conduct – the national regulations which govern franchising in Australia.

Costs & Fees

Franchises can range in price (for up-front franchise fees and set-up) from $5,000 to $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 payable to cover the costs of group marketing.

Get Advice

It is essential to get competent professional advice from qualified and experienced business, accounting and legal advisors before becoming a franchisee. Visit the Franchise Advisory Centre’s website at www.franchiseadvice.com.au for more details.

Do not enter into self-employment and franchising if you are not prepared to risk losing your investment. There are no guarantees of success in any form of small business, and even though franchising is a very successful form of small business, it is still a business venture with many of the same risks inherent to any other business venture. These risks should be acknowledged and understood from the outset.