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CHANNELS Make sure you’re fully informed before purchasing a franchise, advises dr michael schaper, deputy chair of the ACCC


efore you buy a franchise it’s important to gather as much information as you can, to help you make an informed decision. The best time to fi nd out whether a franchise system is the right one for you is before you’ve signed a contract or handed over any money. There are some simple things that you can do to ensure you are as well-informed as possible before entering into an agreement. Consider the following tools that you can use to discover information about the business:

the disClosure doCument The Franchising Code of Conduct is a mandatory law which requires all franchisors to give potential franchisees a disclosure document, a franchise agreement and a copy of the code at least 14 days before the franchisee signs the agreement. The disclosure document contains a lot of the key information about the franchise. It will tell you what payments you’ll be required to make, whether you will have an exclusive territory and what will 110| franChising may/Jun 2013

happen when your agreement ends. It also provides information about the business experience of the franchisor, and whether the business or franchisor is involved in certain types of court actions.

former and Current franChisees Franchisors are required to provide in the disclosure document details of how many franchisees have left the franchise system in recent years. If those former franchisees consent, the disclosure document will also provide their contact details. It can be useful to investigate why a franchisee chose to leave the system; ask yourself whether you identify with their reasons for leaving, or whether they left for reasons that are unlikely to affect you. Speaking to current franchisees and visiting their business premises is also an option when researching a franchising opportunity. Current franchisees can tell you whether the reality of running the business matches the expectations that they had when they first bought their franchise. They can tell you what to

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How to... | Due Diligence

Franchising Magazine May / June 2013  
Franchising Magazine May / June 2013  

What should you look for in a franchise? Find out nine key elements to consider before you purchase in the latest issue of Franchising magaz...