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Find out what it’s really like to be a franchisee
Appearances can be deceiving and 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, potential franchisees 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 Franchisee manual helps franchisees and potential franchisees to understand their rights and responsibilities.
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
Potential franchisees need to thoroughly research:
- the particular business they are buying
- the franchise system that they are joining.
This means asking questions, doing their own research and getting independent advice.
Read the franchising documents
Potential franchisees need to carefully read the information in the documents the franchisor gives them. In most cases, the franchisor must give potential franchisees a minimum of 14 days to read these documents.
Understand the disclosure document
The franchising disclosure document can be full of useful information about a franchise business but it can be difficult to read.
The ACCC’s Quick guide to a franchise disclosure document can help potential franchisees and includes tips on how to spot warning signs.
Then, ask questions from the franchisor, other franchisees and independent advisers
After reading the documents that the franchisor has given to them, potential franchisees should:
- ask the franchisor to explain anything that is not clear, or to provide more details that could help them decide if the business is right for them. We have a list of some of the questions that potential franchisees should ask their 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 potential franchisees can ask other franchisees
- get independent, professional advice from a lawyer, accountant and business adviser.
Always get your own professional advice
Even if someone has owned or worked in a small business before, franchising can be very different.
Potential franchisees 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.
It is very important to check for yourself whether the franchise is a good deal or not. This video covers things every potential franchisee should do before signing an agreement or paying money. The video is available in English, Hindi, Chinese simplified and Chinese traditional.