Once you’ve done your research, you need to assess the opportunity, understand laws that apply (such as franchising, tax, intellectual property, leasing, and employment) and read the franchise agreement in detail.
It pays to get professional advice. Seek professional support from an accountant or lawyer who specialises in franchising. Investing in professional advice before you sign is one of the best investments in your business.
Consider the information you have researched and what you have learned through your own due diligence inquiries and think about your interactions with the franchisor and their team. You may feel more comfortable signing up with a franchisor who offers:
- Transparent communication: Effective franchisors maintain open and honest communication with their franchisees, and provide clear information on expectations, performance, and changes to the system. Think about how the franchisor responded to difficult questions and how available they were to engage with you. Were they interested in finding out about you and whether the franchise was a good fit with your desires and goals, or were they trying to rush you into signing up?
- Ethical leadership and business practices: Good franchisors lead by example, promoting ethical business practices and holding themselves and their franchisees accountable. This includes adhering to legal requirements and industry standards.
- Adaptability: They are willing to adapt and innovate, responding to market changes and feedback from franchisees to improve the franchise system.
- Comprehensive training programs: They provide ongoing training and support, so franchisees understand their roles and responsibilities. This can include initial training, regular updates, and access to online resources.
- Fair dispute resolution: Have they established a fair and efficient dispute resolution process to address conflicts between franchisors and franchisees? This can help maintain positive relationships and prevent legal issues. Arbitration is only undertaken when both parties agree and then binds both parties to the outcome. Including an advance agreement to arbitration in a franchising agreement indicates the franchisor is committed to resolving disputes without going to court, even when mediation or conciliation has failed.
- ‘Try before you buy’ in-business experience: Some franchise systems provide for and encourage you to spend some time working alongside a franchisee to gain a first-hand sense of what you can expect if you invest. This can be a valuable reality check and a great way to establish how well you fit with the opportunity on offer and business in which you may become a part.
Business.gov.au and the Australian Taxation Office has more helpful tips when buying a franchise and tax implications.