Assessing a Franchise Business
There are a number of questions that a franchisee should ask when looking at a franchise:
• How well established is the franchisor?
• What are the franchisor’s plans for the development of the franchise network?
• How long is the franchise term, and is it exclusive?
• What is the franchise area?
• Do you have to buy premises? Do I have to fit out premises?
• Is there adequate disclosure documentation?
• What are the operating manuals like?
• Are you able to pick out what fees you have to pay on an ongoing basis and are they reasonable? Could these fees increase in the future?
• Where do you obtain products and services? What is the cost structure?
• What is the extent of training provided by the franchisor? What are the costs involved?
• What assistance in operating a business do you get from the franchisor?
• What reports and financial information must you submit to the franchisor?
• How can the franchise be terminated?
• What post termination restrictions are there in terms of running a business similar to the franchise business?
• What is the process for selling the franchise?
• What dispute resolution procedures are there?
• Is the franchisor a member of any national body?
• Can the franchise make a profit?
Where can I get help?
There are many complicated issues related to franchising. Because of this the Franchising Code of Conduct makes it compulsory for a franchisee to get proper professional advice before signing any franchise agreement.
• draft and advise on franchise documents; and
• act in disputes regarding franchises.
For further information, contact: