Franchise Tips And Trends

SmartCompany.com.au:

The strong educational focus of the Western Australian franchise inquiry report released last week underlines the importance of franchisees knowing what they are in for before buying a franchise.

Decisions to buy franchises made in limited timeframes with little background knowledge of franchising or the business itself are fraught with danger, and frequently end in disaster.

The original introduction of the Franchising Code of Conduct in 1998 attempted to address these problems by both requiring franchisors to provide a disclosure document (which must provide approximately 250 items of information, irrespective of system size) at least 14 days before signing a franchise agreement, as well as a seven-day cooling off period after signing.

At the time, these innovations were believed to be adequate, but since then the code has been amended twice, most recently with further disclosure requirements added as a result of the 2006 Matthews Report.

But code or no code, the decision to buy a franchise is one that is often treated emotionally rather than rationally. Many of the appeals of self-employment stem from a desire to be one’s own boss, to be in control of one’s own destiny, and to enjoy a better lifestyle by having more time with family and to pursue leisure activities.

These appeals are strong drivers for people to go into business for themselves, franchised or otherwise, and is borne out by a 2007 Franchise Advisory Centre study that found that almost 80% of the reasons given for buying a franchise involved non-financial factors such as lifestyle, brand support and to be in charge of one’s own destiny.

To get around these emotional drivers in order to make balanced business decisions, franchisees need to better educate themselves before buying a franchise.