Buying a Franchise Business

We have set out below the stages that are usually involved in buying a franchise business.

 

Explore the franchise opportunities available

While there are many franchising opportunities, not all of them will be the right fit for you.

You should consider your own strengths and your interests, when considering buying a franchise.

You’ll want to know whether operating a franchise will provide you with an adequate financial return and offer a lifestyle that suits you.

 

Receive an information pack from one or more franchisors

You should carefully read through the information pack provided to you.

If you have any meetings with the franchisor or its representatives you should make clear notes of those meetings and what is represented to you about the franchise system.

Explore what the business’ core product or service is and consider whether the business has a unique selling proposition.

Look at the business’ competitors and consider whether any competitive advantage the business has is sustainable.

 

Apply to the franchisor

During this stage you can expect to sign a confidentiality agreement and pay a fully refundable deposit.

A franchisor can only take a non-refundable payment or deposit when:

  1. you have been provided with a current disclosure document of the franchisor (Disclosure Document), the franchise agreement in the form in which it is to be signed (the Franchise Agreement) and the Franchising Code of Conduct (the Franchising Code);
  2. you have been given 14 days to read, understand and take advice about the disclosure document, the franchise agreement and the Franchising Code;
  3. you have given the franchisor a written statement saying that you  received, read and had a reasonable opportunity to understand the disclosure document and the Franchising Code.

 

Receive your Documentation

You should receive from the franchisor:

  1. an Information Statement;
  2. a current disclosure document for the franchisor;
  3. a franchise agreement in the form of the agreement which is to be signed;
  4. a copy of the Franchising Code of Conduct.

 

Conduct Due Diligence and Get Advice

Before you enter into any agreement you should thoroughly investigate the offer and the franchise system and obtain advice from an accountant, a lawyer and a business adviser.

The disclosure document will set out the contact details of franchisees in the franchise system. You should contact both current and past franchisees and ask them about their experiences.

You should also prepare business plans and budgets.

 

Negotiate any amendments

As a result of the advice that you obtain or the information that you gather when investigating the franchise system, you may want to negotiate either the offer being made by the franchisor or the documents that the franchisor proposes that you sign.

 

Sign the Franchise Agreement and any associated documents

You can only sign the franchise agreement after

  1. you have been given 14 days to read, understand and take advice about the disclosure document, the franchise agreement and the Franchising Code;
  2. you have given the franchisor the  written statements required by the  Franchising Code.

Once you have signed the franchise agreement you have seven days during which you can cool off and terminate the Franchise Agreement (there are generally costs involved in terminating the Franchise Agreement at this stage).

 

Commence operation of the Franchise Business

Once you have signed the franchise agreement and any other relevant documents, you can commence operation of the franchise business.

 

Contact us so that we can provide you with detailed, relevant advice in relation to the transaction and the franchise agreement.

 

Further Information

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