How to buy a franchise on a budget

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Inside Franchise Business: Tips for buying a franchise on a budgetYou’ve got the ambition to run your own business but the funds are a little constrained. Can you still invest in a franchise and benefit from all that entails?

Franchising in Australia is a $146bn business that stretches across almost all industry sectors, and ranges from eye-wateringly high investments in retail models down to mobile and work-from-home options that don’t strain the pocket.

In your search for a low-cost business model it’s important to remember that everything comes at a cost. That means a franchise offering exceptional benefits, services and head office support in return for a budget investment may struggle to sustain or fulfil its projected maintenance.

A low-cost business may instead rely on franchisees themselves to fill in the gaps - that will require extra effort or commitment, or an acceptance that one or two elements of service or support that might be useful aren’t available.

Some business models offer to help franchisees source clients - either as a temporary measure to get the business established, or as part of the long term package. It’s important to understand how much the franchisor will expect you to build on this by sourcing your own leads and referrals so there is no misunderstanding over performance expectations.

The business is likely to be home-based or mobile, which might be the perfect solution for you. But it can be challenging to be a sole trader who is dependent on their own motivation to show up every day and maintain a disciplined approach to business. Perhaps the role will demand you are constantly on the road? Perhaps there will be very early mornings or late nights to deliver a business service to customers when they most need it.

Assess all the elements of the business and speak to existing franchisees to discover the reality of the day job, and check that the franchisor/franchisee relationship is typically the sort of partnership you want to be in.

Of course, whatever the cost level, there are some fundamentals in franchising that apply in most instances.

Here’s a list of 5 things to consider:

1. Compliance

Consistency of branding, product and service is crucial to a franchise network - you need to follow the rules.

2. Franchising Code of Conduct

All franchising agreements are covered by the mandatory Franchising Code of Conduct and it applies to both franchisors and franchisees.

3. Limited term

In most franchise businesses, an agreement grants a franchisee between three and seven years to trade under the brand’s banner - it’s often possible to renew and get a second or third term, but it isn’t a guarantee.

4. No guarantees

There are no guarantees in business - and that includes franchising. Your choice of brand, location, the costs you outlay and the hard work you put in will all go to making a success of the business - but it can fail.

5. Due diligence

Undertake your own research before signing any documents. That means researching the market, evaluating locations, speaking to existing and former franchisees, and of course getting legal and financial advice.

Sarah Stowe

Sarah Stowe heads up the editorial in the Inside Franchise Business group at Octomedia. Sarah is a hands-on editor who has worked in consumer and B2B titles in UK and Australia and she has been editor of the View More...
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