Buying a franchise is an exciting step and one of the most unique commercial relationships. However, it is one that must be entered into with eyes wide open. Like any relationship, transparency and communication is important.
You’ve met “the One”. Naturally, the prospect of starting a new relationship can seem exciting, however there is a serious side to buying a franchise. All prospective partners tend to put their best foot forward on the first date, but you should also ask the franchisor the hard questions – like whether they have a proven financial model, what systems they have in place and their plans for the future.
Being a franchisee is not for everyone. Before committing to the franchise, make sure you have the three A’s – the Attributes, Attitude and Appetite – to being a franchisee. Ask yourself why you want to buy a franchise and consider what your expectations are from the outset. Also make sure you check the entry requirements and understand all training and operational elements of buying the business.
There are hundreds of opportunities on the franchise market and you may be tempted to swipe right. Before you making any crucial decisions, ensure you understand what’s on offer – does the brand align with your values and is it the right culture-fit? What support will the franchisor give you? Can you see yourself in it for the long-term?
Even though you may be starry eyed, it’s still vital that you understand the formal agreement with the franchisor. What are the expectations and boundaries of your impending marriage and what happens if it fails? Make sure you get to know the franchisor through the disclosure document, and know exactly where you stand under the franchise agreement. At this stage, you will also need to develop your own long-term business plan and be familiar with your ongoing financial responsibilities.
Before you sign on the dotted line, it’s important that you are committed and confident in the choice you’ve made. By seeking advice from your support network – like family, friends and professional advisors – you can be comfortable that you’re making an informed decision.
Just like buying your first home, setting up your franchise business will require capital set aside as well as a clear understanding of both parties’ obligations. This will include your role in fitting-out the premises, completing training and buying equipment and products.
Like any marriage, franchising is a two-way street. You will need to be proactive and contribute to the franchise relationship at all levels. A franchise business can only be successful if you work together, so it’s important to schedule in regular check-ins and meetings with the franchisor. This will ensure that both parties are achieving their goals and are on the same page.
Set some anniversary targets and align them with the minimum performance criteria set out in your franchise agreement. You should feel comfortable that these are achievable and discuss any concerns you have with the franchisor.
Just like when getting married, you don’t want to think about things going pear shaped. However, you need to know what avenues and support mechanisms are available to you if you have a dispute with the franchisor.
The Franchising Code of Conduct sets out a dispute resolution procedure, so you should check that the franchise agreement complies with the Code in this respect and that a procedure is clearly set out.
In the event of the franchise relationship coming to an end, you need to know what avenues are available to you in exiting the business. This can be an emotional and stressful time, so give some thought to your exit strategy early on and lean on your professional advisors if and when the time comes.
Legalite and Franchise Right are your industry specialists and professional advisors. Whilst we’re no marriage counsellors, we’ve consulted with hundreds of franchisors and franchisees - meaning you can trust us to support you in your franchise journey.