Not In Their Name

Smh:

Franchises can be a perilous and expensive business if investors don’t do their research.

More Australians than ever are choosing to give up their day jobs and buy themselves the position of their own boss as the proud owner of a franchise.

Franchising now employs about 600,000 workers, according to the Franchise Council of Australia. Since the introduction of a mandatory code of conduct in 1998 the number of complaints to the Australian Competition and Consumer Commission, which administers the code, has reduced as the industry has matured.

But the popularity of franchising has seen the emergence of a group of ill-prepared workers all too willing to invest their life savings in a franchise without doing the groundwork first.

Owning a franchise is a highly rewarding way to make a living for a large number of Australians, but it can also lead to financial ruin for those who don’t know what they are doing. Scams and bogus business schemes are among the first risks facing those looking to buy in.

The consumer watchdog has taken numerous cases to the Federal Court and actively scans newspaper advertisements in a bid to detect and shut down unscrupulous operators before they start claiming victims.

In April this year, the Federal Court found directors of the Photo Safe and Data Vault franchises misled 37 small business investors, who paid up to $160,000 each for photographic and imaging service businesses that made little or no returns on that investment. These investors should have sought professional advice before handing over their money.

But the risks go beyond scams. Even legitimate, sound franchise businesses can take years to establish and return a comfortable profit. Read More