Buying into a franchise? Know how you’ll get out before you get in.
“If I could just get out of my franchise for what it cost me to get into it, I’d do it now!”
I hear that from franchisees far too often.
They’re struggling to make a profit and working 7 days a week. After a while they realise they’ve bought themselves a job: mowing lawns, washing dogs, detailing cars or making pies. If you’re happy doing that, make enough profit and still have time for a life, then go for it.
🎧 Prefer to listen?
I go deeper with a business broker who has lots of franchise experience in Series 1, Episode 12 of the Business Ready For Sale podcast: Selling and Buying Franchise Businesses.
Be VERY careful in shopping centres
Getting into retail in a shopping centre? Some franchisees I’ve talked to work 7 days a week. And the only people making money are the centre owners and the franchisor.
There needs to be enough profit in what you sell to cover all your costs AND pay weekend rates for staff, so you get some time for a life. Then there needs to be money left over to pay yourself and put into your super.
Look, I am NOT against franchises! There are some excellent franchises out there, and most franchisors do the right thing by their franchisees. A franchise can be a great learning experience when you’re moving from employee to business owner. My point is this: keep your eyes open and understand what you’re getting into.
When you get into a franchise, new or established
You are NOT buying a business. You’re signing an agreement to operate one of the franchisor’s businesses for a ‘term’. As a franchisee, YOU DON’T OWN A BUSINESS. In fact, you don’t own anything.
There’s no guarantee your agreement will be renewed at the end of the term, or that you’ll be able to sell. READ THE AGREEMENT AND GET LEGAL ADVICE! Need a good lawyer? I can refer you.
However well you build the business over the term, the client base (the goodwill) belongs to the franchisor.
Find out how you’re going to get out of it before you get into it.
Talk to the people who’ve been there
There are some very good franchise operations in Australia. And with a strict Code of Conduct for both parties, there’s no excuse for signing up with your eyes closed.
Always speak to existing AND former franchisees before you sign. Find out how they’re going, and why the former ones left. The franchisor must give you up-to-date details for this in their disclosure document.
Do your homework
- The Franchising Code of Conduct is a mandatory code across Australia. Read it on the ACCC website.
- Do the free ACCC online course “Is franchising for me?”
- Listen to the franchise episode above, then talk to me. I’ve been in a franchise, and when I was a broker I sold some.
Some franchises are good. Some aren’t. My message, always: DO YOUR HOMEWORK and make sure it’s right for you.
Eyes open before you sign.
Already own a franchise? My free Sale-Ready Scorecard shows how saleable it is today. Under 5 minutes. Thinking of getting in, or out? Book 15 minutes with me first.
Do your homework. THEN sign.
