Shop Local: The pros and cons of buying a franchise

Buying a franchise can be a great pathway to running your own business.
Buying a franchise can be a great pathway to running your own business.

WITH more than 1000 franchise groups operating in Australia, there is no shortage of choice for those looking to buy into an existing business model.

Buying a franchise can be a great pathway to running your own business.

You potentially reap the benefits of an established brand with a popular product or service and a respected reputation.

There’s also access to support with advertising and marketing, and operation manuals to streamline the way you run your business.

On the other hand, franchising gives you much less control of how, where and for how long you run your business.

For every success story, there is a cautionary tale of what not to do.

Before signing away your cherished savings, it is essential that the prospective franchise buyer seeks expert advice.

Franchise agreements are not always written with buyers’ interests in mind.

The recently released report Fairness in Franchising, highlights concerns that the Small Business Development Corporation (SBDC) has aired around the imbalance of power in the current Australian franchisor/franchisee relationship.

Franchising is a big part of the Australian economy, and contributes around nine per cent to our gross domestic product.

It is also a popular and important entry point for people wanting to run their own business.

However, the current imbalance of power can sometimes lead to abuses and misconduct.

While the long-awaited report makes 71 recommendations to help address the power disparity between franchisor and franchisee, it is still essential that buyers understand the franchise agreement, read the disclosure statement carefully, identify financial risks, understand the range within which your franchise can operate and learn about any ongoing fees and royalty payments.

It’s also worth having a chat with existing franchisees within the business.

Their advice could provide valuable insight into the workings of the franchisors.

The SBDC website offers a wealth of advice on franchises, including buying, selling, the code of conduct, retail leases and more.

The SBDC also provides a range of other services to the small business sector, from business workshops to advisory services and much more.

Visit smallbusiness.wa.gov.au or contact one of our experienced team on 13 12 49.