outlets yourself. Carefully detailed systems
and processes need to be in place to franchise
your business. You will need the assistance
of lawyers and accountants to set up your
franchise plan and ensure it complies with the
Franchising Code of Conduct.
SBDC Chief Executive Officer, David Eaton,
says potential franchise buyers should also
engage a lawyer or accountant as part of their
due diligence to ensure they know exactly
what they’re signing up for when purchasing
a franchise.
“The Franchising Code of Conduct, most
recently updated in 2015, sets the groundwork
for fair dealings between franchisors andaVoid the pitFalls
and make FranChising a
great opportunity For you
“in purchasing any business, it is imperative to check that the
figures being offered are realistic and achievable. most franchisors
are honest and genuine in their dealings with franchisees, but
some are not.” - david eatonSmall business commissioner David eatonfranchisees but the onus is still on both parties
to be willing and able to meet their obligations
under the franchise agreement and the code of
conduct.
“The code includes an obligation for parties
to act in good faith in their dealings with
one another and for franchisors to provide
prospective franchisees with information on
the risks and rewards of franchising.
“The code also provides for court ordered fines
and penalties in the case of breaches.
“Whether you’re starting a business from
scratch or buying a franchise, you must
research thoroughly before investing any
mone y.
“With a franchise, the cost is not only the
upfront purchase price but the ongoing costs
of running the business, including royalties,
percentage of sales payments and, in many
cases, being required to purchase supplies
through the franchisor or related entity.
“Another important element of due diligence
is talking to as many past and present
franchisees as possible, and checking what
customers are saying about them in online
reviews,” Mr Eaton said.Avoiding business disputes
Disputes can be crippling to any business, so
having the opportunity to resolve disputes
quickly and inexpensively, without the need to
go to court, is often a life-saver for businesses
in trouble.
The SBDC provides a dispute resolution
service for business to business disputes,
including between franchisees and franchisors.
Mr Eaton says the SBDC dispute resolution
team works with both parties to find a
mutually acceptable solution to the dispute.
Current results show more than 80 per cent
of business disputes raised with the SBDC,
are finalised without the need for formal
mediation or court proceedings.Leon decided to buy his local café
franchise when the owner was looking
to sell. Leon paid a $10,000 deposit to a
business broker and started discussions.He then gave the franchise agreement
and the café’s lease agreement to his
lawyer and accountant to review.
The lawyer advised against signing
the lease agreement, as it contravened
provisions of the Commercial Tenancy
(Retail Shops) Agreements Act 1985
(WA) which applied to the café.
The accountant advised that he had
been unable to obtain full details of the
franchisor’s financial position, as required
by the Franchising Code of Conduct.
Leon decided not to proceed with the
purchase of the café based on the advice
from his accountant and lawyer, but the
broker refused to return the $10,000
deposit.
Through its dispute resolution service, the
SBDC assisted Leon to negotiate with the
broker and his deposit was returned.supporting your own idea or
someone else’s?
Starting your own business requires a good
idea of your own. As the owner of the
business, you also have sole responsibility for
choosing the business model, registering the
business, leasing or purchasing commercial
premises (if required), designing marketing
material, implementing a marketing strategy
and employing and training staff. In short,
you make all the decisions concerning
your business and you are therefore solely
responsible for the success or failure of the
business.
Buying a franchise means taking on someone
else’s business idea, adopting their business
model and working to their business plan.aVoid the pitFalls
and make FranChising a
great opportunity For you