Some of Franchising's Most Frequently Asked Questions
QUESTION: We have a disagreement with our franchisor. We do not agree with the way the franchisor uses our marketing budget - we think there should be more local advertising. Is there anything we can do?
ANSWER:
The marketing budget to which a franchisee contributes is usually set out in the disclosure document and franchise agreement.
The actual way in which the marketing budget is spent is determined generally by the franchisor and is not usually for local area marketing which is left to the franchisee to pursue separately.
A franchisee should raise the issue of concern firstly with the franchisor and see if the franchisor is willing to deal with the matter. Put your issues in writing and invite a written response. Review the response in light of the obligations set out in the franchise agreement and operations manual.
If the matter is not resolved you can pursue the issue via the dispute resolution provisions under the Franchising Code of Conduct. Clause 28 of the Franchising Code of Conduct sets out the general dispute resolution provisions.
You could also seek legal advice to identify the issue and whether you are within your rights to take the matter further.
This response was provided by Wisewould Mahoney Lawyers
QUESTION: I am starting a new business venture - and am interested in franchising in the near future. How does one go into franchising? What is the first step I need to take?
ANSWER:
There are some very simple questions to ask yourself if you are thinking of becoming a franchisor. We often send these out as a 'thought starters' to business people that are considering the franchise adventure. Some of these questions will be easy to answer, while others a little more confronting. To be in the zone you'll need to have at least considered an answer to all of them.
If yours is a 'new business venture' then considering franchising, 'in the near future' could be a little harder than expected. The key to being able to sell any franchise business is that the model has been proven in the marketplace. As a potential franchisee I want the security and piece of mind that the business actually works, and the easiest way for me to do that is to have seen it work, in most instances for at least 12 months so I can see the annual cash cycle of the business. In some business cases, dependant on the business category, we would suggest you have multiple test outlets running to also prove the model in different locations.
Well here are a few questions to get you started.
• Are you familiar with the Franchising Code of Conduct?
• Have you run a pilot business? If so how long has this business been running for? (List each outlet if there is more than one).
• Have you conducted feasibility studies, can you prove your product or service has the potential for growth?
• Have you considered how many territories/outlets you may have?
• Are you considering expanding into other states, overseas?
• Have you discussed Franchising with a Franchise Lawyer and Franchise Accountant?
• What IP protection do you have in place?
• Have you considered what how you will structure your company?
• Have you considered how many years the term of your Franchise Agreement will be?
• Have you considered how much your royalty fees will be and if these will be fixed or percentage based?
• Have you considered what type of territory you will have; i.e. exclusive, marketing etc?
• Are you intending to have a marketing fund and if so have you considered what the royalty fees will be and if it will be fixed or percentage based?
• If you are a retail outlet have you considered who will hold the head lease?
• If you are a retail outlet who will be responsible for finding a suitable suite?
• What are your current supply arrangements?
• Do you currently manufacture any of your own products?
• What documentation do you currently have in place;
• Operations Manual
• Sales and Customer Service Manual
• Marketing Manual
• Other, please specify
• Do you have a current business plan, if so does this incorporate the transition to a franchise model?
• Have you considered how to administer the franchise fees and reporting process?
• What staff do you currently have in place and are you intending change this under a franchise model?
• What sort of induction training do you currently have in place or have you considered?
• Have you considered how you will recruit new franchisees?
• How would you describe your current company culture?
• Are you willing to make the transition from being a business owner to a franchisor (people person).
• Do you have adequate capital to fund the initial stages of franchising?
• What is your point of difference against your competitors?
• Are you willing to share your success with others (franchisees).
This response was provided by The Edge Corporate Strategies
To find more tips and advice from Troy Hazard just click here
QUESTION: My hubby and I have been given an opportunity to purchase a franchise in an area he has always wanted to get into. I was wondering what type of information is the franchisor obligated to provide before we make our decision?
ANSWER:
Prior to entering into a Franchise Agreement or prior to a Franchisor receiving a non-refundable deposit relating to the franchised business, the Franchisor must provide a prospective Franchisee at least 14 days before entering into a Franchise Agreement, a Disclosure Document and a copy of the Franchising Code of Conduct.
The purpose of a Disclosure Statement is to provide a prospective Franchisee with current information that is significant to the operation of the franchised business in order to assist the prospective Franchisee to make an informed decision about the franchised business. The Disclosure Document must be set out in the form prescribed under the Franchising Code of Conduct and must contain the information required under the Franchising Code of Conduct about the franchised business.
The Franchisor may also provide you with some marketing information about the franchised business and copy of the Lease for the business premises. Normally the Franchisor will require you to sign a form, Confidentiality Agreement, prior to giving you the above documentation
This response was provided by Mason Sier Turnbull
WHERE TO NEXT?
For information and advice on the best franchise or business for you; franchise and business opportunities; and general advice when buying a business, a franchise or starting your own franchise, be sure to visit our expert pages:
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Suitability?
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Plus
Australian Competition and Consumer Commission
For links to the latest ACCC publications which are a must-read if you are considering a franchise business of any kind.
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