There are more than 900 franchises in Australia, ranging from fast food restaurants to jumping castles, from garbage bin cleaners to dog walkers. When selecting a franchise that is right for you, it’s important to choose one that suits your own talents and lifestyle.
One example is Jumping J J’s, a franchise of jumping castles for children’s birthday parties that operates only on weekends. This might suit if you have a part-time week day job, or it might suit a retired person who wants to work a couple of days a week and doesn’t mind working on the weekends.
At the other end of the scale is a McDonald’s franchise, which might operate 24 hours a day, seven days a week. This might suit an entrepreneurial person who has extensive experience in business.
Finding a good fit
‘It’s important to find the best fit for you, rather than just choose something you think you might like,’ says Richard Evans, chief executive of the Franchise Council of Australia. Sometimes, it’s an idea to look for a franchise in an area of business in which you have experience.
For example, if you have worked in financial services, you might consider buying a mortgage broking franchise because you might already have an understanding of credit checks and home loans.
Ask around
Once you know the franchise you want to buy, talk to other as many other franchisees as you can about the level of support you will receive (franchisors are required to give potential franchisees a list and contact details of other franchises in the system). It’s also a great idea to talk to previous franchise owners to get a feeling for why they left the business.
If you get consistent feedback from a number of former franchisees that the level of support is not appropriate, or there are other problems, this should be a warning sign. Don’t just listen to the person selling the business – do your research and talk to suppliers, and even customers if you can.
The legal angle
It’s also a great idea to find out if there have been any court cases against the franchisor and find out why the cases were brought against the franchisor.
Most importantly, critically review the disclosure document that outlines exactly what each side of the party can expect from the relationship. It’s also a legal requirement that this document is reviewed by a lawyer and an accountant.
Be professional, get advice
When selecting a lawyer and an accountant, Evans says it’s important to make sure you use lawyers and accountants who are accredited to work in the franchise industry. ‘A suburban lawyer usually has no idea about franchising, and you end up paying for the lawyer to be educated in this area,’ Evans says.
It’s easy to baulk at paying for professional advice, particularly at the start of the venture. But Greg Chapman, who is a director of The Australian Business Coaching Club which provides consulting advice to small businesses, says, ‘if you are buying a franchise that costs tens or hundreds of thousands of dollars, it’s worth paying for the right advice to give your franchise the best chance of success. Good advice is expensive – but so is failure.’
Take your time
Also remember that, when choosing a franchise, the first opportunity might not be the right one. Look at a number of different franchising opportunities before taking the plunge.
It’s also worth noting that not every franchise will be available to you. Chapman says, ‘High-end McDonald’s franchises are tradable pretty much for gold. It’s very hard to buy one – they usually make you work in another franchise for some time before they will even talk to you.’