There are plenty of pros and cons associated with buying a franchise that must be taken into consideration before making a decision about whether or not you should buy a franchise licence. Here is a list of things you should take into consideration before you embark on your journey as a franchisee.
There Must Be a Demand for The Service or Product
For a business to succeed and remain profitable there must be a demand from the public for its service or product. This means that it is recommended that you undertake some research on the present and emerging markets that the product is aimed to cater towards the needs and desires of. The existence of potential demand will give you some insight into the future growth path that your business has if you decide to purchase a franchise licence.
Make Sure You Understand the Franchise Agreement Before Signing
The franchise agreement can be described as the contract you agree to for a specific amount of time, which is usually five years for most of the time. This agreement covers exactly where and how you will be required to run the franchise. It is strongly recommended that you discuss any concerns you have with a professional adviser before signing the agreement so that way you understand your responsibilities and rights.
When your franchise agreement ends, the franchisor is not required to automatically renew your franchise. This means that any business or positive reputation you have built during your tenure could ultimately go back to the franchisor.
Make Sure That You Read the Disclosure Statement Carefully
The franchising industry in Australia is regulated by the Franchising Code of Conduct. It is essential to make sure that before you agree you a financial agreement you are given important documents such as; your code of conduct, franchise agreement and disclosure statement.
The disclosure statement should include all of the current franchisees within the business. It is strongly recommended that you get in contact with a few of them to find out how their franchisee journey has been going and ask them if they have experienced any problems in relation to dealing with the franchisor or understanding the business model. You should try to contact as many as possible to help you gather as much information as possible.
Make Sure You Are Being Offered Lots of Support and Training
A high-quality franchisor will give you huge amounts of business support to help make sure that you as a franchisee can achieve as much success as possible. You need to make sure that the company you are deciding to buy into gives you all the required tools and information to help you succeed. Some of these things include a solid business plan, a well put together marketing strategy, professional training and development programs. The purpose of all these tools is to make sure that your business remains competitive and capable of keeping up to date with trends and other businesses that operate within the same industry.
Understand Your Financial Risks
There are plenty of financial risks associated with running a business. It is important to take these risks into consideration especially when many of these risks are completely out of your control. Some of the risks that might be out of your control include; your competition, the state of the national or local or global economy and so on.
Furthermore, you will need to have extra funds to prepare you for any unexpected costs that pop up during the time term of your franchise agreement. An example of this would be your franchisor might decide to change their systems or the look of their stores which you in most cases will be responsible for the costs associated with these changes.
Another thing you must be aware of is that consumer demand most likely won’t be the same in every geographic location. This means that just because a franchise performs well in a number of different locations it doesn’t mean that it is guaranteed to succeed in every location it operates in.
Furthermore, you most likely won’t have the choice to decide where you buy your stock. This can be frustrating if you find yourself in a situation where you can purchase cheaper producers via another supplier when your franchisor already has a long-term contract in place with another supplier.
Thinking of Buying a Franchise?
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