Things to Know Before Investing in Franchises - List Absolute

Things to Know Before Investing in Franchises

franchises

Australia is one of the ideal countries for businesses because of its market economy. It has a consistently high GDP per capita and a comparatively low poverty rate. Based on the 2019 Global Wealth Databook report from Credit Suisse, Australia has the second-highest wealth per adult.

Because of the country’s exceptional performance, more Australians are inspired to start a business. Franchising opportunities in Australia are thriving in almost all sectors.

But how does a franchise business work and does it fit within the country’s vast economy? Here are several details about franchising that may help you decide if it is the best opportunity for you.

What Is Franchising?

A franchise is a business model where a company, officially referred to as the franchisor, owns a brand and allows the franchisee to sell the products or services from the brand for a specified time. This business structure allows prospective business owners to enjoy being the boss of their own business under the guidance of a popular brand.

Status of the Franchising Industry in Australia

Franchising opportunities in Australia managed to revolutionise how the retail industry works by letting the owners compete with large companies using resources equivalent to their bigger counterparts.

A study stated that while some early franchisees were operating in Australia towards the last years of World War II, the prevalence of this business model only began in the late 1960s to early 1970s. It started with automotive and petroleum brands, then later expanded into the fast-food industries.

Today, franchising is significantly growing across almost all industries, especially in the retail sector. While this business model started with overseas franchisors, almost all the country’s franchise opportunities today are homegrown; Even people from other nations franchise Australian brands overseas.

How the Industry Works

A joint report from the Franchise Council of Australia and Griffith University revealed that the franchise industry employed as many as 472,000 people all over the country in 2016. Approximately 13% of those belong to the food franchise sectors.

Since franchising has become a large industry, it intensifies the importance of having all parties act in good faith while a franchise contract is in effect.

Like most businesses, you need to understand that there are risks involved in franchising. But both parties are more fortunate to have legal protection to secure each other’s best interests during the contract.

Both the franchisees and the franchisors are required to follow a code of conduct that mentions how they must treat each other during their partnership.

Some of the franchising code stipulations include requiring franchisors to submit a complete set of documents and information, signing a ‘Good Faith Obligation’, and agreeing on a dispute resolution mechanism. The franchisors must also agree to have a seven-day cooling-off period before entering into a new agreement again.

If you have a franchise agreement and want to terminate it, you also need to comply with your contract’s stipulations before ending it. You also need to look into other Australian legislation like the Fair Work Act, the Australian Securities and Investments Acts, various tax laws and other licensing schemes depending on your state.

Investing in a franchise business in Australia has plenty of perks. It can be the simplest and most effective way to launch your own business. You only need to learn more about the kind of franchise you want to invest your money in, to ensure your business’s success.

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