The Australian Government with regards to the new franchise rules has published draft amendments to the Franchising Code of Conduct to support the establishment and operation of the Franchise Disclosure Register.
The amendments proceed the 2021-22 budget commitment of $4.3 million for a new Franchise Disclosure Register to assist prospective franchisees to make an informed decision before entering a franchise agreement.
Stuart Robert the Federal Minister for Employment stated that the release of the planned amendments are a crucial step, building upon reforms to the Franchising Code of Conduct which took effect on 1st July 2021.
“The franchising sector makes a valuable contribution to the Australian economy, and the Morrison government is committed to supporting the sector through increased transparency and accountability,” said Stuart Robert the Federal Minister for Employment.
“The local Australian franchising sector will always get a better deal under the Morrison government. We are getting on with improving the sector and continue listening closely to the thousands of local franchise businesses who need a hand,” continued Mr. Robert.
Under the planned reforms, the register will be publicly available and free to access. Franchisors are required to upload and publish information on the register by Monday 31st October 2022, which will support franchisees to undertake due diligence and make informed business decisions.
The exposure draft legislation, explanatory statement and a supporting guide are available on the Treasury website. Interested parties should review the draft amendments alongside the supporting guide, which outlines the register’s proposed features and consultation questions.
Stakeholders are able to provide a submission in response to the draft amendments and consultation questions to firstname.lastname@example.org by Friday 29th October 2021.
Things to Do Before Purchasing A Franchise
Before you decide to go ahead and purchase a franchise, you must consider the new franchise rules and same issues as you would if you were buying or starting any other business. Do online research on the franchise system, know the market you are going to be operating in and understand how the business works.
It is also super important to consider the issues specific to franchises, such as what happens if the franchise or franchisor fails. The franchisor will act in their commercial interest. It is your responsibility to protect and act in your own commercial interests.
Don’t Rush Putting Pen To Paper – When you are buying a franchise, you’re often dealing with a sales person. Avoid rushing into making a quick decision. When you are given new information or documents take the time to understand them, verify the information and get advice. If the franchisor tries to rush you, remember you can walk away. There will always be other opportunities.
Talk to Other Franchisees -To gain valuable knowledge about franchising as a career, it would be a great idea to talk to other people who have already done what you are planning to do. Talking to other franchisees will make it easier for you to determine if franchising is the right career move for you to make.
It is encouraged that you take the time to talk to at least 10 franchisees and tap into their knowledge. Ask them about all the pros, cons, and if there are any hidden costs.
It is important to keep in mind that ego is a big thing in the business world. Therefore, some franchisees might not feel comfortable with admitting to you that they have struggled.
Questions to Ask Other Franchisees
- What information did they learn about franchising that they didn’t gather from their research before they became franchisees?
- How long did it take them to become profitable?
- How much did they budget for their enterprise, and how much did they end up spending?
- What was the toughest part of building the business?
- How supportive is headquarters?
- How challenging is it to hire good staff?
- Based on their experiences given what they know now, they would do it again or recommend the franchise to a close family member or friend?
Consider getting professional help and advice – To help your franchise business get off to a good start it would be advised that you know the new franchise rules and hire an accountant and a legal expert to help you navigate your journey as a franchisee. An accountant and lawyer will help you review your financial health and how it will be affected by the franchise arrangement before you sign a franchise contract. The reality is if you’re buying a business that costs between $150,000 and $1 million, you need an attorney to look at the documents and tell you what they mean.