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Buying a Franchise


The franchise sector is the fastest growing sector of small business. To be classified as a franchise, there must be certain distinctive characteristics:

  • There must be both a franchisor, and a franchisee, who is granted the rights to run the business under a marketing plan that is already set up.
  • The franchise has to have an identifiable trade mark/symbol that it can be linked to.
  • The person who buys the franchise (franchisee) has to pay fees to the franchisor such as training, inventory, royalties etc. before they start the business.

The franchisee and franchisor are reliant upon one another, and without each other, the franchise would fail. Though they are separate business owners, they are interrelated via the type of business that they operate. They both have essentially the same goals, and it is up to the franchisor to assist the franchisee with continuing help; they get money via fees/purchases out of it.

There are two key documents that relate to a franchise agreement.

  • The Franchise Agreement that is like a contract, and contains the rights and responsibilities of both franchisor/ee, and
  • The operation manual, which assists you in the day to day running of the business, as stipulated by the franchisor.

As with all types of businesses, franchising has both its pros and cons, and it is important that you conduct in-depth research into the idea before you start up a new business (franchise). Be wary of deals that sound too good to be true – you can never be too cautious. And most importantly, never hand over any money until you have written contracts or plans in your hands. If you do come across any misconduct, report it; the franchisee has rights too, and these are stipulated in the Franchising Code of Conduct (1998).

Considering all of that, the thing that you should really take into consideration is your personal strengths and weaknesses – do you have what it takes to run a franchise?

If you have any queries regarding franchising or accounting in general, or if you require the services of certified accountants, please do not hesitate to contact us now by submitting an online enquiry form, or call +61 2 9223 9166.