The small business specialists
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Franchising is a business model that allows one business to operate under the established brand of another business and to sell its products and/or services for a specified time period.
Franchising can be an excellent way to operate a business and is an alternative to setting up your own business. However, it is important to carefully consider all your options before buying a franchise and to seek advice from an experienced business adviser, accountant or lawyer.
Franchising in Australia is regulated by the Franchising Code of Conduct.
Before choosing a franchise you should:
TIP:Take advantage of the free, online education programs for people considering buying a franchise. The Pre-entry Franchise Education course and the Franchise and Small Business Survival eClass are available from Griffith University’s Asia-Pacific Centre for Franchising Excellence.
There are three types of franchise:
The cost of buying a franchise will depend on which one you select. You will be expected to pay an initial fee and an ongoing royalty fee weekly or monthly, or based on turnover.
Buying and running a franchise has similar tax implications to other small businesses. Refer to the Australian Tax Office for more information about franchising and tax.
You will also need to consider how you will finance buying the franchise; franchisors rarely fund prospective franchisees.
Some of the points to consider are listed below.
Most franchisees will need to lease commercial premises in which to operate. Before signing a lease make sure that you understand your rights and obligations.
Seek professional advice before committing to the lease or signing a lease agreement.
TIP:A poorly negotiated lease could cost you a lot of money, particularly if your business does not succeed and you need to get out of the lease. Read our publication: Leasing business premises for more information or contact one of our specialist advisers.
The Franchising Code of Conduct (the Code) forms part of the Competition and Consumer Act 2010 and is regulated by the Australian Competition and Consumer Commission (ACCC).
The Code provides protection for franchisees in relation to:
Before entering a franchise agreement, you should be provided with a copy of the:
Make sure that you conduct due diligence of the franchise and seek professional advice from an experienced business adviser, accountant or lawyer.
Before committing to a franchise it is a good idea to investigate the:
Read more about evaluating a franchise.