5 Important Things to Consider Before Buying a Franchise


There are some great benefits that come with joining a franchise. You're starting your own business but you're not really going it alone. You've got the advantage of potential customers already knowing your brand. And, of course, the potential monetary and lifestyle rewards!

But there are a few possible pitfalls to be aware of before you jump on into a franchise arrangement. Even big names aren’t immune to strife as evidenced by recent news involving the likes of Domino’s and Retail Food Group (who own Donut King, Brumby’s Bakeries, Gloria Jean’s).

Here are few key things to consider before buying into a franchise.

1. Ask the Experts

It’s common sense but so many people seem to cut corners that it’s worth repeating: always seek professional advice from your lawyer, accountant and/or financial advisor about whether you can afford to buy in and what they can tell you about the company’s finances and history. Ask existing and former franchisees - preferably from the same company you are considering - about their experiences. Know how long the cooling off period is after signing your contract and take full advantage of it by double checking your research during this time.

2. Value for Money

Every franchising arrangement is different. Don’t just go for the first franchise that catches your eye; compare a few that are similar. Ask for all possible fees and costs (and get them in writing) and pit that against what the franchisor will be providing you with. What kind of support will they offer in terms of initial and ongoing training, marketing and construction? Basically, what are you giving and what are you really getting in return? Think about whether you have enough relevant experience to handle running a franchise that takes a more hands-off approach.

3. Who’s the boss?

Franchisors have to protect their image and that of all other franchisees. Most have at least a few strict rules - that you have to stick to - about how the business will be run so that customers receive a consistent experience. So, if you’re a bit of a control freak or simply want creative freedom, franchising might not be quite right for you.

4. Supply versus demand

This is like the golden ‘location, location, location’ rule in real estate. Do people want what you’re selling, and do they want it where you want to sell it? Just because there’s not a Pizza Hut/Crust/Domino’s or whatever brand you’re trying to establish in your area doesn't mean there aren’t 10 other pizza joints. And, if there aren’t 10 other pizza joints, people in the location could all be allergic to cheese. Unlikely? Perhaps. But you simply won’t know until you make friends with market research. Don’t trust the franchisors figures here: either hire professional researchers or at the very least get out there yourself, talk to the locals and scout the location (even if it’s an online space).

5. Check out the Franchise Council of Australia

The Franchise Council of Australia are the peak body for franchisees and franchisors in the country and have heaps of handy resources and information on their website.You might even want to consider becoming a member so you can have your say. FCA members abide by a common code of conduct so there’s an added layer of security if you choose to join a franchise from within their ranks.

If you're looking for investment advice, come in for a free one hour financial consultation. We'll assess your individual status quo and create an action plan specific to your needs. Click here to book your appointment today!


Featured Posts