What should I be aware of when buying a business?
What do I need to know about purchasing a franchise?
How do I value my business?
Is it possible to franchise my business?
Where can I get information about franchising?
Where can I get information about other businesses in the same industry?
There are no guarantees, but the risks of being a victim of misleading claims and statements can be minimised if you:
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When assessing a franchise opportunity, it is necessary to make sure that the franchise documents comply with the regulations set down in the Franchising Code of Conduct. This covers all the issues such as the franchise agreement, the disclosure document, the lease requirements, marketing guidelines, franchise territory, supplies, franchisor and franchisee obligations and termination of the franchise agreement. An investment into a franchise can represent a large financial outlay, so there should be adequate steps taken to ensure that you have had independent professional advice about the proposal and about the franchisor and the product or service. You can contact the Franchising Council of Australia and New Zealand for further assistance, or visit their website at www.franchise.org.au. Franchising information can also be obtained from the Australian Competition and Consumer Commission website, click here to access.
The value of the tangible assets, plus an estimated value of the intangible assets such as goodwill, usually determine the value of a business. A potential buyer examines the ability of the business to earn a reasonable return on the funds invested, after an equitable salary for the owner has been deducted. The seller, having put much time and money into forming the business, seeks to recover time and cost outlays by asking a premium over and above the asset value of the business. Goodwill may be seen as the capitalised cost of taking over an established business with established suppliers, clientele, cash flows, trained employees and systems of operation – compared with starting a business from scratch.
It is possible to franchise any type of business, regardless of what the product or service is. You must have a successful business before you contemplate franchising it. It would be advisable to engage a professional consultant to assess your business and determine what it has to offer prospective franchisees. It is necessary to comply with the regulations set down in the Franchising Code of Conduct, and it is also advisable to join the Franchise Association of Australia and New Zealand, and make sure that you comply with their regulations.
The Franchise Association of Australia and New Zealand is responsible for liaison with Government and commerce, industry ethics, education, industry developments and the promotion of franchising in general. Also the Franchising Code of Conduct sets out guidelines for self-regulation in the Australian franchise sector.