Franchising is one of the best ways that a business owner can expand their business. It is also a great undertaking for investors or business owners who want to tap into an already established brand. Buying a franchise would be the better option if you have a specific product which you want to work with. However, for the successful business owners who are looking to expand their business, franchising is also a great way to grow, build a presence in the market and increase revenue. There are a few factors and rules that you need to be aware of as you seek to use this option.
Things to Consider
If you are looking to expand your business through franchising you need to:
- Have a properly constituted business franchising model
- Test and operate with your franchise model before selling it to others
- Consult a solicitor and accountant about all the relevant documentation
- Franchise registration needs to be specific
- Legal processes must be followed when establishing a franchise
- Take measures to ensuring a good relationship with all your franchisees
- Select individual franchisees who are most suitable to improve your business model.
- Comply with the Franchising code of conduct
- Prepare an agreement and manual for managing the franchise
- Understand all your tax obligations
- Have a mechanism to resolve franchise issues and disputes
Compliance with the Code of Conduct for managing franchises is a must for all who are looking to go down this path. It’s a legal requirement which has to be adhered to and seeks to protect the interests of all parties concerned. The Code sets out each parties rights and obligations and also sets a standard for the creation of a franchising agreement. The code also provides a solution to dispute mediation.
The franchise agreement is a legal document that will be used to govern the rights and obligations between franchisees. It has to be reviewed by a solicitor. When the new business is your idea, ensure that your idea is well protected by the franchise agreement under Intellectual Property legislation. The agreement also needs to adhere to the Occupational Health and Safety Obligations regulations. Tax obligations and any fees which affect taxation must be well understood as well. These are some of important aspects of franchising your business that you need to be familiar with when expanding your business.
If you are looking to expand your business, you should take the time to consider franchising and how it can help you grow. The venture can offer you many great opportunities and extensive benefits. The fact that it adds to your revenue stream while not requiring your day to day management or presence makes it even more attractive as a business expansion tool. Franchising increases the network of distributors for your goods and services thus ensuring that there is proper supply to your clients and interaction with clients throughout the country and beyond.
Tips to Buying a Franchise:
- Verify Promises: It is important to research the franchise that you are looking to buy into. A franchisor is likely to make statements and promises but don’t just take their word for it. Be sure to do your research and make sure to check that the business is sound, that you will be able to earn a stable level of income and the level of walk in traffic etc.
- Read the Paperwork: A franchisor is required by law to give you a disclosure document, a compy of the franchising agreement and a copy of the Franchising Code of Conduct at least two weeks before you sign the final agreement. Be sure to read the agreement and br sure to understand it and know your rights under the code before you agree to sign.
- Seek Advice: If you are unsure about your franchising agreement or do not fully understand it, be sure to seek advice from a professional BEFORE you sign the agreement. Often it is good to consult a lawyer, accountant or business adviser depending on your needs.
- Talk to other franchisees: Under the Franchising Code of Conduct, the disclosure document has to contain the contact information of current and past franchisees. This gives you the chance to contact other franchisees and ask them about their experiences with the brand. It gives you a chance to enquire about earnings and also gives you a chance to find out some of the potential pitfalls that caused other franchisees to leave.
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