If you're looking to start a business, buying into a franchise can be a good alternative to starting a unique venture. Similarly, if you're planning to expand your business, a well managed franchising agreement can be an effective way of moving into new markets.
Franchising allows one business to operate under the trading name of another business' established brand and sell its products and/or services for a specified period.
Like any business decision, franchising must be considered carefully and the right processes should be followed. It's important to also note that franchising is regulated by the Franchising Code of Conduct.
Consider consulting a business adviser, accountant or solicitor for advice before deciding whether to buy a franchise or franchise your own business.
Buying a franchise
Buying a franchise gives you the right to run an established business and sell its products and/or services for a specified period. Before you buy a franchise, consider the same issues as when purchasing or starting any other business, along with issues specific to franchising such as what happens if the franchise or franchisor fails.
To improve your chances of success, try using our Starting your business checklist.
It's important that you also understand that once you have entered into a franchise agreement you are legally committed to run the business according to the requirements set out in the franchise agreement and the franchise operating manuals. You'll also be bound by the mandatory Franchising Code of Conduct.
Read about Complying with the Franchising Code of Conduct.
Franchising your own business
If you've established a successful business that you're looking to expand, you can consider franchising. If managed well, it can open your product or service to new markets and extend your brand's reach. Before you franchise your business, make sure you have a successful and proven franchise model.
Operating your own franchise model before selling a franchise to someone else can help prove your concept, establish demand and create sound processes and systems that can be repeated in each new franchise. There is no specific franchise registration or approval process, but establishing a franchise is a legal process and can take some time. It's important that you plan thoroughly and seek professional advice from an accountant, solicitor or franchise consultant. If you decide to franchise your business, it is vital that you have a good working relationship with the franchisees. It is important that you are careful to select a franchisee that is a good fit for your franchise business.
Read about the Franchising and tax obligations within our Taxation topic.
If you're considering expanding your franchise overseas read more information in our Selling products and services topic.
To give yourself the best chance of success, it’s important you understand what’s involved before you buy a franchise.
To help you improve your business knowledge, the Asia-Pacific Centre for Franchising Excellence has created the Franchise and Small Business Survival eClass series.
The series offers four free online videos:
- Contractual understanding - Learn what a contract is and what you should look out for before signing one.
- Expectations - Get an idea of what expectations you’ll need to manage as a franchisee or business owner.
- Debt - Understand what debt is and how much debt is enough.
- Partnerships - Get tips on what to consider when entering a partnership and how to keep the relationship healthy
Check out the Franchise and Small Business Survival eClass series now!