Most of us would fancy working as our own boss. Perhaps it has already crossed your mind that purchasing a franchise could be the way to go? Before making any decisions, it is most important that you understand the pros and cons of australian franchising. After all, you would not want to dive into the deep end of the pool without first having swimming lessons!
What is franchising?
A partnership where the franchisor allows a franchisee to use its business system in exchange for payment. When you purchase a franchise you are essentially purchasing a right to market and distribute the franchisors goods and/or services for a set period of time
Benefits of buying a franchise?
Established reputation: Typically, the franchise you have bought has a history of being an established, and in some cases, recognised product or service. You have automatic access to instant clients that if you were stating your own business may take years to achieve.
Advertisements: Because national franchising is assumed by the franchisor, you will be provided with proven methods of advertising for your local branch!
Support network: As a franchisee you are not in the business by yourself. You are surrounded by other franchisees and more importantly supported by the franchisor by way of a range of systems etc.
It is likely that other branches of the franchise business would have previously experienced a similar problem; therefore you will be notified on the best ways to avoid any troubles!
Autonomy: You still maintain a certain level of autonomy and flexibility to operate your franchise business.
Negatives of a franchise?
Lack of freedom: It is likely that you will have less freedom when it comes to servicing your business. As most of the key features of running your franchise will be included in the franchise manual, you might not be allowed to express your own creativity or innovation. For example, you may have ideas relating to the promotion of you franchise business. However, the franchisor might not permit these ideas which you have suggested, therefore restricting your freedom.
Inflexibility: You are required to strictly follow the franchisor’s operations and procedures as set out in a manual. If you stray from these operations and procedures you will be found to be in breach of your franchise agreement. You will be required, in certain circumstances, to obtain consent from the Franchisor before implementing a business idea. For example, you may wish to have branded pens for your franchise business. Typically all stationery used and branded will need to be approved by the franchisor prior to use.
Poor reputation: You can describe a franchise as a building, in which each franchise branch is a building block. If one block is damaged, it is likely that other parts of the building will need repairing. Similarly, the negative reputation of one franchise business could potentially influence the standing of the entire franchise. Issues such as unethical conduct or incompetent servicing could really damage the brand name and reputation, which in turn could negatively affect your business.
It is inevitable that purchasing a franchise will have its share of pros alongside its cons. Nonetheless, you can be confident that you now possess a general understanding into the world of franchising. Whether or not you take this step into the unknown: The choice is yours! Contact LegalVision today to speak with one of our team of franchise law specialists.
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