Steps to take before you sign up to a franchise

Find out what it’s like to be a franchisee

Appearances can be deceiving. You can’t tell how well a business or franchise system is doing from the outside. Talking to other franchisees is the best way you can find out what a franchise business is really like.

To know more about what franchising is like, you should:

• speak to at least 5 current and former franchisees
  • We have put together some questions you can ask former and current franchisees to help you find out what a franchise is really like.
  • The franchisor must include contact details of their current and former franchisees in the disclosure document.
  • The franchisor cannot influence or encourage a former franchisee to ask for their contact details be removed from the franchisor’s disclosure document.
• read our franchisee case studies about the experiences of others in franchising. These are based on one or more reports the ACCC has received.

Understand laws about franchising

The Franchising Code of Conduct is one of the laws that apply in franchising, but it doesn’t always protect franchisees when things go wrong.

The Competition and Consumer Act 2010 and the Australian Consumer Law applies to small businesses, including franchises. Our Small business and the Competition and Consumer Act guide helps small businesses understand their key rights and responsibilities under these laws.

Research the business you are buying

You need to thoroughly research the business you are buying. Ask questions, do your own research and get independent advice.

You also need to look into the franchise system that you're joining and check the information available on the Franchise Disclosure Register.

Read the franchising documents

You need to carefully read the information in the documents the franchisor gives you. In most cases, the franchisor must give you a minimum of 14 days to read these documents.

Understand the disclosure document

The franchising disclosure document is full of useful information about a franchise business, but it can be difficult to read.

To help, the ACCC’s Quick guide to a franchise disclosure document includes tips on how to spot warning signs.

Ask questions of the franchisor, other franchisees and independent advisers

After reading the documents from the franchisor, you should:

• ask the franchisor to explain anything that is not clear, or to provide more details that could help you decide if the business is right for you. We have a list of questions that you should ask your franchisor. Remember to get the franchisor to put anything that they tell you in writing or, preferably, in the franchise agreement
• speak to former and current franchisees to understand what it’s really like to be a franchisee in this franchise system. We also have a list of questions that you can ask other franchisees
• get independent, professional advice from a lawyer, accountant and business adviser.

Always get your own professional advice

Even if you have owned or worked in a small business before, franchising can be very different.

You need independent advisers with experience in franchising. These advisers help identify risks and concerns that may not be obvious.

One type of advice may not be enough. Good legal, accounting and business advice can help prevent unexpected problems down the track. After the cooling off period has run out it's harder to just leave the business.

Watch our video about the key steps before buying a franchise

It is very important you check whether the franchise is a good deal or not. This video covers what every potential franchisee should do before signing an agreement or paying money. The video is available in English, Hindi, Chinese simplified and Chinese traditional.

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