People considering buying a franchise should evaluate everything from their financial position to their ability to make a profit, and hiring a lawyer and an accountant makes good business sense.


Small Business commissioner David Eaton said franchising was generally considered a less risky business option but buyers should do their homework thoroughly.

“They should weigh up the pros and cons of establishing an independent business instead of buying a franchise, ensuring they understand the concept of franchising and the basics of going into business, ” he said.

“Costs range from about $10,000 to more than $1 million — the requirement for additional capital will vary from system to system, and there will always be upfront costs, such as legal fees.”

People needed to be confident that the new business would generate enough income to pay all the franchisor’s initial and ongoing fees, and all set-up and acquisition costs, while still making a profit over the term of the agreement — usually five years.

The type of business, franchise group and the territory or location being offered should be compared with similar franchise offerings and people should be wary if the opportunity sounded too good to be true — due diligence and independent advice were paramount.

 

Franchise: Boost Juice bars.


People should ask themselves:

- Will there be ongoing demand for the product or service?

- Will the franchisor continue to evolve the system and innovate?

- Will the franchise system continue to be competitive in the marketplace? Is the type of business a passing fad?

 

 

© The West Australian

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