Small Business

Five tips for prospective franchisees

1. Familiarise yourself with the Franchising Code of Coduct

Franchisors must comply with the Franchising Code of Conduct, which sets out rights and obligations for those buying and running a franchise in Australia. 

If you’d like to familiarise yourself with the code, The Australian Competition and Consumer Commission has some great information for franchisors and franchises, which you can find here.

2. Make the most of online resources

The ACCC isn’t the only organisation with great information for franchisees and prospective franchisees.

Business Victoria - has a great checklist for those buying a franchise.

Franchise Council of Australia - has a list of questions you should consider before buying a franchise and a booklet that will help you understand the risks and rewards of franchising.

3. Review the franchise agreement carefully and seek legal advice

Marsh & Maher franchising expert Marianne Marchesi says there’s a few key points to be on the look out for in franchise agreements, including:

What is the term of the franchise agreement? Does this allow the franchise enough time to recoup its investment and make a profit?

Are there any restraints following the end of the franchise agreement which will prevent the franchisee from conducting a similar business? 

Does the franchisee have exclusive rights to a territory?

When can the franchise agreement be terminated?

“It is important that legal and accounting advice is sought from professionals with expertise in franchising,” Marchesi says.

“Franchising is a niche area requiring specialist knowledge, therefore it is important to obtain appropriate advice.”

4. Be wary of franchise scams

While scams are not particularly common, there are a few things to be on the lookout for that might signal a dodgy deal.

The promise of a ‘get rich quick’ scheme.

The franchisor does not have a disclosure document, or has one that is incomplete.

“Franchisees should always do their due diligence before committing to a franchise. Speak to other existing franchisees, seek legal and accounting advice and research the franchisor online,” Marchesi says.

5. Take advantage of free courses

The ACCC spsonsors a ‘Buying a Franchise’ course, run by Griffith University's Asia-Pacific Centre for Franchising Excellence. The course is free, and will help you assess franchise business opportunities. You can find out more information about the course, or sign up, here.