As a potential franchisee, understanding the benefits of joining a franchise is paramount. In this model, the franchisor grants the right to operate the business, encompassing intellectual property, systems, processes, and know-how, to third parties—the franchisees. Typically, franchisees secure this right by paying an initial franchise fee and an ongoing royalty fee. This article offers insights to assist you in evaluating whether becoming a franchisee aligns with your business goals.
Benefits of Joining a Franchise
Fundamentally, a franchise system involves the franchisor licensing the right to operate its business to franchisees, such as:
- intellectual property;
- systems;
- processes; and
- know-how.
Franchisors typically grant this right to franchisees by charging an “initial franchise fee” and an ongoing royalty fee. This is calculated as a percentage of the franchisee’s revenue or profit.
The advantages of joining a franchise as a franchisee are numerous. Whether or not these benefits appeal to you serves as a good indicator of determining if this path is right for you.
Established Business
Starting a business can be daunting, especially with the challenges of building a brand and developing systems and processes. Joining a franchise system as a franchisee alleviates this hurdle, as these aspects of the business are typically already developed. The franchisor often provides an operations manual that outlines how to operate the business.
However, you should note that all new businesses, including franchises, experience growing pains. For example, you may experience this in establishing your franchised business within your particular location.
Continue reading this article below the formFranchising Code
Franchising in Australia is regulated by the Franchising Code of Conduct (the Code) administered by the ACCC. The Code imposes particular obligations on franchisors in conducting its franchise system. Additionally, it aims to ensure that franchisees receive protection in their dealings with franchisors. The Code also establishes a standard for how franchisors and franchisees should handle matters between them.
For example, there are disclosure obligations according to the Code, ensuring franchisees have the opportunity to receive legal, business, and financial advice.
Business Assistance
In franchise systems, the franchisor will typically provide you with support and assistance in running your business. This includes initial training and ongoing support throughout the franchise term. Consequently, franchisees often do not need specific industry skills or experience before taking on the franchise business. This is because the franchisor provides the required level of training to operate the business.
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Reduced Risk
If a franchise network has proven to be fruitful, it has a perceived level of reduced business risk compared to starting a brand-new business.
Key Takeaways
Becoming part of a franchise allows you to gain entry to a well-established business, enjoy the protection provided by the Franchising Code, benefit from ongoing business support, and experience a reduced risk of business failure. If this sounds appealing to you, becoming a franchisee may be highly beneficial to achieve your business goals.
If you are considering joining a franchise network, the next step is to ensure that your proposed franchise agreement is compliant and provides the necessary support. Our experienced franchising lawyers can assist you with this as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.
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