FRANCHISING: Making the Right Decisions for you.

31 January 2020 by Simone Pentis

Purchasing a franchise can be an exciting but also scary time, especially if this is a person’s first foray into franchising and/or moving from being an employee to a business owner. Often, a better understanding of what franchising life could be, undertaking a proper due diligence research and getting appropriate advice before entering into any agreements or paying any monies, would have made the difference between a painful or successful future.

There are many steps that should be considered before purchasing a franchise, but this article aims to mention just a few of the initial steps and/or considerations.

STEP 1

One of the first steps before purchasing a franchise should be undertaking an investigation of what it is you are actually wanting from becoming a franchisee. You need to be brutally honest with yourself here. What are the skills and resources you have and are willing to commit, what are you willing to do. What, if any, are the limitations and/or restrictions that need to be considered.

Friends, family and trusted advisors should be spoken to and asked to give their forthright views, which you should consider in addition to your own personal analysis.

STEP 2

The next step is to use your above results to investigate all your potential franchise options. Do not just focus on one franchise system. Even if you are only interested in one, you should look to others just in order to assist you to compare what is out there and any common threads. You should seek to collate as much information as possible from each potential franchisor and compare what you are wanting and needing with what they are offering.

STEP 3

Generally, you need to invest substantial time, money and other resources initially and throughout the franchise, and if you change your mind may not be able to get out of the franchise without substantial cost or process. Consequently, I cannot emphasise enough the importance of doing your due diligence into the franchisor, the franchise system and the specific franchise business you are looking to buy. 

To assist you here I strongly recommend before you lock yourself into any agreement or pay any monies, even if refundable, you speak with your accounting and legal advisors. Make sure these people have specific franchising experience, ask them on this to determine the extent of their expertise and experience. The more experience they have then arguably the better the probability of getting the best potential advice and practical advice from experience within the franchising industry. 

Once you have your advisors on board then generally the more in-depth investigations will take place. In particular, this is when you are likely to get access to confidential information and the franchisor’s franchise documents.

Generally your advisors, if properly experienced in franchising, will review the information collected and recommend any further information that should be sought. Lawyers in particular are likely to encourage you to clarify any unclear or concerning areas arising from their review of the disclosure document, have the franchisor’s (as well as any vendor’s) finances carefully checked by your financial advisors to ensure the value being bought from the vendor as well as the potential franchisor’s current management and potential longevity. Additionally, one of the basic steps is to always contact existing and past franchisees to get their views on the franchisor, franchise system and franchise business, these parties contact details being set out in the Disclosure Document.

These are just a few matters to start you on your path to becoming a franchisee.

For our detailed Franchisee Buyers Tips & Checklist  please contact us. 

We work with our clients to put them in the best position. To let us help you get into the best position and then carry it effectively through, please contact us at admin@advpartners.com.au or on 0406 992 365 for an initial free chat and access to our Franchisee Buyers Tips & Checklist. 

Please note this brief update, does not purport to be comprehensive advice relevant to your circumstances. Consequently specific legal advice for each of your circumstances should be obtained first before taking or not taking any action in respect to this area.