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12 Things You Need to Know Before Buying a Franchise

The decision to buy a new franchise business is not an easy one. Many questions need to be answered before you can make the right decision for your future.

In this blog post, we will answer 12 of the most important ones so that you know if buying a franchise is right for you!

What Is a Franchise and How Does it Work?

A franchise is a type of business where the owner (franchisee) licenses the use of an established company's trademarks, logos, and products from a franchisor. In return, the franchisee pays an initial fee and ongoing royalty fees to the company.

A franchised business is bound by a franchise agreement which is a document that outlines the franchise arrangement between franchisors and franchisees.

It makes note of important business considerations such as:

  • Business premises

  • Lease contract

  • Ongoing costs

  • Marketing fees

  • Disclosure document

  • Franchise systems

  • Cooling off period

  • Franchise term

  • Mandatory code

Potential franchisees must take due diligence and seek professional advice when analysing franchise agreements so that they may make an informed decision.

Advantages and Disadvantages of Franchising

One of the biggest benefits of franchising is that you have a proven business model to follow. This means less research on your part and more time focusing on growing your business. Additionally, a franchise comes with an established brand name and customer base which can help jumpstart your business.

On the other hand, you do not have full control over the business. For example, if a customer complains about your product or service and it is an issue with the franchisor, you will need to contact them for resolution. This process can be very time-consuming and frustrating.

Another thing to consider with a franchise is the ongoing fees associated with being part of most franchises. The benefit to this though is that you also have the ongoing support of the franchise system.

Buying a New Franchise vs Existing Franchise

When deciding whether to buy a new or existing franchise, there are a few things you need to consider. An established franchise may be more financially beneficial because you can get a feel for the business before purchasing. Additionally, buying an existing franchise may come with some built-in customers and a support system from the franchisor. An existing business may sometimes also come with shorter lease terms.

A new franchise, on the other hand, offers more flexibility and customisation options to make it your own.

Is Buying a Franchise Right for Me?

This is one of the most important questions to ask yourself before buying a franchise. Franchises are ideal for people who want to be their own boss but don't have the necessary skills or time to start from scratch. They are also a good option for people who want to grow their business quickly.

However, owning a franchise requires a lot of commitment and financial investment.

If you would like to own your own business and have a genuine interest in the brand that you are supporting then a franchise can be a fantastic business model.

What are the Costs of a New Franchise?

When you buy a new franchise, there are several costs associated with it. The most common ones are the initial franchise fee, equipment and inventory costs, and royalties. It is important to factor all of these into your budget before committing to a franchise.

Is Buying a Franchise a Good Investment?

This is a difficult question to answer because it depends on many factors, such as the industry you're in and the franchise you buy. That being said, the average franchisee typically sees a return on investment within three to five years.

What Training and Support Will I Receive?

When you buy a franchise, the franchisor will usually provide you with training and support to help you get started. This typically includes an initial training program, on-going support, and help with marketing your business.

What Restrictions Will I Have as a Franchisee?

As a franchisee, you will be bound by the terms and conditions outlined in your franchise agreement. This document outlines things such as the responsibilities and obligations of you and the franchisor, your business operations, and how to resolve disputes.

You are also bound by the franchise disclosure document which outlines the brand's policies, procedures and guidelines. It is important to go through this document thoroughly before signing on with a franchise so you understand what your responsibilities are.

How Can I Choose a Franchise

When choosing a franchise, it is important to do your research first. Do some Internet searches and read reviews about different franchises to find the best fit for your needs and goals.

Additionally, it is a good idea to speak with current franchisees about their experiences working with the franchisor and growing their business.

What Is the Initial Franchise Fee?

The initial franchise fee is a one-time payment required to become a franchisee. This fee covers the costs of reviewing your application, providing training and support during start-up, and giving you the right to use the franchisor's trademarks and trade secrets.

How Much Money Will I Need to Start a Franchise?

The amount of money you will need to open your franchise depends on the type of business, costs associated with it, and how much working capital you have. It is important to have a realistic idea of how much money you will need before investing in a franchise.

Is it risky to buy a franchise?

Buying a franchise is not without risk, but it is typically less risky than starting a business from scratch. The biggest risks associated with franchising are the costs of buying a franchise, complying with the franchisor's rules and regulations, and managing your new business.

It is important that you do your own research and seek independent advice before investing all your money.

Do you want to buy a franchise? Would you like professional guidance with any step of the process? Feel free to contact us today for a consultation.


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