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I am Looking at Buying a Franchise Business
How Do Franchises Work?
Basically, a franchise is a form of agreement which allows someone to operate a particular kind of business using the brand name, method of operation and other distinctive features of a business model which has been established and is owned by the franchisor. Sometimes this can be a new business which is just starting to take off or it could be an existing franchise, such as a fast food outlet, coffee shop franchise or a patisserie outlet.
One of the advantages of franchises is the franchisor has usually set up the business model and systems and provides the infrastructure needed to get the business up and running quickly, as well as providing products, recipes, marketing merchandise and other items for use in the business.
Franchises do, however, have their disadvantages. Typically, the franchisee will be asked to pay an upfront fee to acquire the franchise and must sign a franchise agreement which commits them to buying products and services from the franchisor and operating the business in a certain way. Franchisors insist on retaining significant control over the way the business is operated because they want to protect the reputation of their brand by ensuring that each operator has the necessary skill and financial resources to operate the business and maintains high standards.
Starting a new franchise as a franchisor is a complex and expensive process, requiring considerable skill and knowledge. Because franchisors must comply with very specific laws, the legal costs in setting up a new franchise can be quite high.
In Australia, franchises are highly regulated under the Trade Practices Act and the Franchising Code of Conduct. If you are interested in finding out more about franchising, a good starting place is the Franchise Council of Australia website, where you will find answers to many of your questions.