To franchise or not to franchise?

2 min read

PBL’s five key tips and traps for the franchisor

Once upon a time there was a franchisor who decided to open up a range of franchises in several industries including cleaning, appliance rentals, business systems, and other goods and services. The franchisor thought these franchises were a good idea, but did not check to see whether they would work for the franchisees who would be enticed to join up with promises that the franchise could not fulfil. The franchisor had become over-committed and over-stretched, like the dying Roman Empire, did not protect valuable IP, and made many franchisees very angry because of various failures. Eventually the whole business group went ‘belly up’.

So what went wrong here and what should you do if you want to become a franchisor?

Here are PBL’s five key matters you should consider.

1. Look before you leap – do your research and due diligence

Before you even consider going ahead, make sure that the franchise you want to create is going to be an attractive proposition for consumers, potential franchisees and, most importantly, for you.
Look to engage a franchise consultant who can undertake relevant inquiries and discuss with you which business model has the best chance of success. Consult with your legal and financial advisers up-front about the possibility and try and integrate all of your experts into a team for best outcomes.

2. You cannot be afraid of the big bad wolf – compliance and regulation

Franchising is heavily regulated by a mandatory Franchising Code of Conduct and the provisions of the Australian consumer law. Seek early advice from PBL about compliance and regulation. Provided you follow the legal requirements of the Code and some golden rules of consumer law, you should be in compliance and avoid the big bad wolf, the ACCC.

3. Go out on a search and destroy mission

It pays to first set up your basic franchise business model and run it as one or more company businesses in strategic locations, to see if it will work and to determine the level of demand for the product or service you are going to offer. This can also allow the early ironing-out of any problems or difficulties that arise.

4. Protect and grow your honey pot

You are trying to create value in your new franchise system for your future, but you also need to protect it as you do so.

Make sure that your business structure does exactly that. Have one entity – preferably a company with the shareholder being a family trust – operate the business and another entity hold all the valuable assets such as IP, plant, and equipment, and even perhaps have another – such as an SMSF – hold your business real estate with relevant licences and leases in place.

This way, if it all goes pear-shaped you can easily cut off the valuable assets from the drowning business.

5. The devil is in the detail – systems and documents

You have to have really good, compliant, and flexible systems and documents in place to make it work.

The last thing you want is for a disgruntled customer or franchisee to take legal action and succeed because the business systems or documents were not fully functional and workable, like the case I described in the introduction.

So, once upon a time there was a franchisor that followed the advice they were given…

If you have franchising plans, please contact me on xxxx.

DP

 

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Picture of Authored By<br>David Prior

Authored By
David Prior

Director Lawyer, PBL Law Group

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Anita Bradley has been an absolute dream to deal with. Anita's conveyancing skills and knowledge knows absolutely no boundaries along with her effective communication skills which has made selling and buying a completely stress free exchange for us. We recommend PBL Law to everyone looking for outstanding service. We will definitely be returning clients.
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I have experienced an excellent service from PBL (especially from Anita) during the sale of my recent property on Central Coast, and during the purchase of our current property in Sydney. Throughout many challengers, especially with the sale, Anita presented her very professional and knowledgeable conveyancer, positively solving all obstacles. "Above and Beyond" Award going to Anita!!! :-)
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The five-star reviews are well-deserved. I needed a motion and a bylaw drawn up for urgent repairs of my strata unit and the AGM was in two weeks' time. My solicitor was friendly, efficient, knew what documents to ask for, and had all the paperwork prepared well within the timeframe. She also took the time to run through all the legalese and the different possible scenarios with me to make sure I understood. I am so glad to have found this firm and I will not hesitate to use their services again in future if the need arises.
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Anita is amazing! So attentive, approachable and communicates everything every step of the way. I have now bought and sold property with Anita and I cannot recommend her highly enough.
Ron Thomsen
Our Commercial Property conveyancing was handled very professionally. Anita’s experience and responsiveness was an asset in this transaction.
Trace M
I am so grateful for Anita Bradley from PBL Law Group helped me with this property settlement, she has went above beyond to ensure I understand everything because of our deafness. I will recommended Anita or their team. Thank you so much for all the hard work you have done for us.
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For almost 18 months I have been a client of Alex Ilkin. Alex is very knowledgeable and professional and has consistently provided me with thorough, honest and well set out advice, including steering my case through appeal proceedings. He always worked for my best interests with integrity and compassion. I recommend Alex and his team at PBL.

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Jye Hall
Anita Bradley has been an absolute dream to deal with. Anita's conveyancing skills and knowledge knows absolutely no boundaries along with her effective communication skills which has made selling and buying a completely stress free exchange for us. We recommend PBL Law to everyone looking for outstanding service. We will definitely be returning clients.
Kushlan Aluwihare
PBL Law Group were fantastic. Anita from PBL worked with us closely during our property search and made the exchange and settlement process smooth and stress free. Highly recommended.
Gail Whitford
PBL handled my late mothers estate, they were very obliging and patient with any and all questions that we had, thank you to David , Sharon and the other staff that we dealt with, everyone was so easy to talk to and friendly .David came to the home where my Mother was living and helped her to get her will in order, Sharon helped us through the process of executing her wishes when the time came even doing a house call which was so much easier, thank you all so much
S M
I have experienced an excellent service from PBL (especially from Anita) during the sale of my recent property on Central Coast, and during the purchase of our current property in Sydney. Throughout many challengers, especially with the sale, Anita presented her very professional and knowledgeable conveyancer, positively solving all obstacles. "Above and Beyond" Award going to Anita!!! :-)
Amanda Reitzin
The five-star reviews are well-deserved. I needed a motion and a bylaw drawn up for urgent repairs of my strata unit and the AGM was in two weeks' time. My solicitor was friendly, efficient, knew what documents to ask for, and had all the paperwork prepared well within the timeframe. She also took the time to run through all the legalese and the different possible scenarios with me to make sure I understood. I am so glad to have found this firm and I will not hesitate to use their services again in future if the need arises.
Ricky Cooper
Anita is amazing! So attentive, approachable and communicates everything every step of the way. I have now bought and sold property with Anita and I cannot recommend her highly enough.
Ron Thomsen
Our Commercial Property conveyancing was handled very professionally. Anita’s experience and responsiveness was an asset in this transaction.
Trace M
I am so grateful for Anita Bradley from PBL Law Group helped me with this property settlement, she has went above beyond to ensure I understand everything because of our deafness. I will recommended Anita or their team. Thank you so much for all the hard work you have done for us.
Tricia Wheatstone
For almost 18 months I have been a client of Alex Ilkin. Alex is very knowledgeable and professional and has consistently provided me with thorough, honest and well set out advice, including steering my case through appeal proceedings. He always worked for my best interests with integrity and compassion. I recommend Alex and his team at PBL.