If you like the idea of owning a small business but want the support of an experienced network, a franchise business could be ideal for you.
There are many franchise opportunities available but they’re not all equal in opportunity! As such, it’s important to be knowledgeable in the franchise business model and to understand what to look for in a franchise business.
The following eight tips will give you a greater understanding of what to look for in a franchising business opportunity.
Franchise Agreement is Easy to Understand
A franchise agreement is a legally binding contract so it’s important that you understand the terms before you make a commitment. If the terms of the agreement aren’t clear, seek independent legal advice before you sign anything.
Marianne Marchesi, Principal Lawyer of Legalite, has the following tips on what to look for in a franchise opportunity.
- Make sure you ask the Franchisor as many questions as possible before committing to the franchise, like whether they have a proven financial model, details of their initial and ongoing training programs and what systems they have in place to support franchisees.
- The Franchisor’s Disclosure Document will contain the contact details of both past and existing franchisees. It’s a great idea to speak to as many franchisees as possible before buying the franchise to gain real insight into how much support franchisees get and if the franchise system is a functioning model.
- Franchising is regulated by the Franchising Code of Conduct and affords franchisees a number of legal protections. Have a read of this before you buy the franchise so that you understand your rights going in.
- Conduct your own financial modelling and feasibility studies on the franchise opportunity with your professional advisor. Don’t forget to factor in paying yourself a wage and any requirement to outlay a significant amount during the term of the franchise (such as for a refurbishment).
- Engage a franchising lawyer to review and advise you on the Franchise Agreement and Disclosure Document. A good lawyer will make sure the franchise documents are compliant with the Franchising Code, don’t contain any unfair contract terms and will explain your rights and obligations to you in plain English. Make sure you speak to a specialist franchising lawyer as they will have a better understanding of the franchising sector and an intimate understanding of the Franchising Code.
High Brand Awareness
Brand awareness and loyalty are two of the greatest assets for a franchise business. Make sure the franchise you are considering has a unique product or service and a brand that stands out amongst the competition. This can mean the difference between success and failure for a franchise business.
Consistency of Product or Service
In addition to the product and/or service being consistent, there needs to be consistency across all areas of the franchise business, from advertising materials to staff training and everything in-between. This ensures a uniform marketing message and a strong identity.
Location of Franchise
It’s important to consider the location of the franchise business as you don’t want to directly complete with similar business in the area. Also consider traffic, parking, visibility, size and layout of the establishment.
Affordable Entry and Reasonable Fees
Franchise opportunities can be expensive, so it’s vital to consider the financials of the business. It may be pertinent to consult with a financial advisor who specialises in franchises to ensure affordable entry and reasonable fees.
Sales Show Steady Growth
The franchise business should have financial records that show steady growth. Again, it’s important to have a specialised financial advisor look over these records before you sign a contract.
A strong management system is essential to the success of a franchise business. So, make sure you find out about the people behind the franchise. Ask questions about their background and experience in the industry.
A Good Fit
Is this business a good fit for you? What do you know about the industry? Do you have the education and experience to excel in this business area? It’s important that you consider if you support and believe in the founder’s vision and the products and/or services offered. To make a business work you’ll need to be passionate about the industry and have the relevant skills and experience.
When you buy into a franchise you have the benefits of small business ownership without the risk associated with starting a new business. You are also protected, to a degree, by being part of a larger, established business network.
But don’t go into a franchise agreement without considerable research into the business. It’s also advisable to educate yourself on how to manage compliance with franchise obligations and legislative requirements.
You can gain more knowledge on franchising with a professional development course, such as the Franchise Business Program with Australian Online Courses.
The Franchise Business Program is an ideal course if you’re planning to invest in a franchise business opportunity. This online, professional development program will give you the confidence to identify a profitable business platform, how to manage a franchise, work within this business framework and manage relationships within a franchise.
Australian Online Courses
If you’re looking for an online training provider that offers quality content, reasonable course fees and superior student support, choose Australian Online Courses for your professional development.
Visit online to discover hundreds of industry-approved, flexible, online courses covering almost every industry sector. Or you can contact one of our friendly Learning Consultants today on 1300 762 221.