Buying a franchise

With business failure rates for start-up businesses up to 60% within the first 5 years of operations compared with existing franchise systems only in the vicinity of 5%, many new business operators are turning to the support and assistance along with a tried and true product delivered by franchise operations. But buying a franchise can be a very expensive business if you don’t do your due diligence.

In Australia today there is a franchise operating in almost every type of business category, with varying levels of complexity and cost.

Prior to buying a franchise, potential franchisees should do the following;

  1. Assess your own reasons for wanting to own a business;
  2. Assess the lifestyle and income implications of owning and operating a business;
  3. Assess the franchise opportunities consistent with 1 and 2 above.
  4. Build your understanding of the franchise relationship by reading the Franchise Guide.
  5. Narrow 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 process.
  7. Ensure you have 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 by no means an exhaustive list of things you should consider prior to buying a franchise, but if you work through these 10 steps you will be at less risk of rushing headlong into a hasty and ill-informed decision.

SRJ Walker Wayland is a member of the Franchise Council of Australia (FCA) and supports potential and existing franchisees and franchisors. Not only can we assist with assessing the viability of your investment into a franchise, advice relating to financial aspects of franchise operations, but also support with project managing the various steps required for franchisees or franchisors to achieve their objectives.

If you have any questions relating to franchising, please don’t hesitate to email  John Riseley on john.riseley@srjww.com.au or contact him on +617 3490 9988.