“The success of your business is our business success…” (Francis Ruggiero, Behan Legal, Managing Director 2005)
As buying a franchise is likely to be one of the most important personal business decisions you will ever make, you must base this decision on a firm foundation of information. Although the rewards may be extensive, the commitment in capital and borrowings is significant.
Your decision to purchase a franchise requires an understanding of the franchise system you want, and how to evaluate it.
Small businesses do not fail solely because of poor products or services. They often fail because they did not anticipate their capital requirements, and did not have the resources or experience to fully analyse the risks they made. Knowing the right questions will ultimately lessen your chances of making mistakes; helps avoid underestimating your capital needs, and therefore, reduce your risk of failure.
With extensive experience in advising businesses, Behan Legal helps franchisees through this first critical stage of the decision, including meeting and interviewing the franchisor to ensure the proposed franchise meets your needs.
ANALYSIS OF THE FRANCHISE
Behan Legal conducts detailed enquires and analysis on the proposed franchise, to assist the franchisee making an informed decision. After all, as a franchisee, making the right decision is imperative – your livelihood depends on it. The analysis delves into the commercial viability of the business. For example, the proposed franchisee must understand the nature of ‘failure’ in franchising. Business failure refers to closing the location’s doors, permanently.
However, in a franchised system, statistics on failure do not include franchised locations repurchased by the franchisor, and continue in operation as a company-owned location, or a location owned and operated by a new franchisee.
Therefore, it is important when discussing failure rates with any franchisor that one considers questions about re-acquisitions and transfers.
Behan Legal conducts audits of your businesses and company structures and implement asset protection programs before you embark on your new franchise. Ensuring that you have enough working capital to sustain you in the start-up period is crucial; yet, more importantly most people neglect long-term planning.
Without regular thorough reviews of the business, you may discover it is too late to rectify avoidable problems and issues. Ultimately, good reviews will give you benefits of saving money and avoiding adversely high-risk situations.
The franchisor must provide the franchisee with the franchise disclosure documents, which should provide sufficient information about the franchise system, the franchisor’s experience in the franchise business, its litigation and bankruptcy history, the cost of opening a franchise, and initial and continuing fees to allow you to make an informed decision.
The disclosure document should have an explanation of the relationship and responsibilities of the franchisor and franchisee, and most importantly, a list of franchisees one can contact.
At this stage, the experienced team at Behan Legal can investigate and verify the Disclosure Document reviewing all the advantages and potential risks of the franchise operation. It is important at this stage that you call and visit as many franchisees as possible, to get a general overview of the system. Once you have determined that the franchise business is for you; then Behan Legal can assist you in the next important stage.
Franchisees must completely understand all the rights and obligations of the franchise contract before signing. Often franchisors will present their franchise agreements as immutable documents, whereas in reality there may be room for negotiation.
Behan Legal will examine every aspect of the franchise agreement to see the advantages, protections, and risks to you as the franchisee focusing on the termination and transfer clauses, lease negotiations, defaults, and restraint of business covenants. If negotiation is necessary, Behan Legal can assist in negotiating the terms of the contract that appear to be detrimental to your rights.
FRANCHISE OPERATIONAL DOCUMENTATION
You should review a copy of the Operations Manual before entering into any franchise agreement. This is very important as the Operations Manual contains the terms and conditions under which you are bound to run your franchise. Areas covered by the manual are comprehensive, and can range from the visions and objectives of the franchise, to workplace safety, uniforms, risk management, and dispute resolution. We can help you review this manual to see whether the business is suited to you, and whether the terms and conditions are feasible.
FRANCHISE ONGOING BUSINESS-CONCERNS
The signing of the franchise agreement is not the end of the process of buying the franchise business; rather, it is the beginning of your franchise relationship. Throughout the course of your business, numerous issues will arise about the running of the business, the franchisor-franchisee relationship, or even employer-employee relationships.
Behan Legal’s relationship with you does not end on the signing of the franchise agreement, but rather, continues as ongoing support and advice to ensure that your business runs successfully and smoothly.
NEED MORE INFORMATION
Behan Legal advises and assists on these important issues, however, given the complexity will meet with you personally to evaluate your position. For an appointment, call 03 9646 0344