Question 1

How much does it cost to franchise a business?

Accepted Answer

There is a vast range in the cost of franchising a business. For many years the price was typically between $100 000 and $200 000. When we launched the Franchise Institute in 2004 we were the first consultants in the market place to offer low cost franchise consultancy, with our price starting from $29 000 +GST. Today some 14 years later there are more people in the low cost franchise consultancy space and the more expensive consultants have also reduce their prices – which is good news for you the customer.When comparing price make sure that you compare ‘apples with apples’. I have heard of quotes for as little as $9 000 and what I can say with complete confidence is that anyone who is offering franchising services for that price must be cutting many corners, and I would say “buyer beware’. My belief is franchise as cost effectively as you can but know where to invest and where to make savings. Cut too many corners and it will leave you and your business exposed further down the track.

Question 2

How long does it take franchise a business?

Accepted Answer

The answer depends on what systems you already have in place and how much time you have to work on the franchising process. For most business owners it will take approximately 6 months, but it can be complete in 3 months if required and some customers prefer to do it over 9 months.

Question 3

How long do I have to have been in business before I can franchise?

Accepted Answer

Contrary to popular belief there is no prescribed time that a business has to have been operating before it can be franchised. 20% of all franchise systems in Australia start off as a franchise from the first day of trading? A further 19% franchise their business within the first year of trading. The vast majority of the remaining franchised businesses, franchised just after 3 years of operation. While there are definite benefits of having an operating prototype it is not essential and many successful franchise companies have traded as franchises from their very first day of operation.

Question 4

Why can’t I just get my local lawyer to draft the franchise documents?

Accepted Answer

Would you go to your GP to have brain surgery or a hip replaced? Like medicine, law has many specialty areas and franchising is one of them. Franchising is Australia must comply with the Franchising Code of Conduct which is governed by the ACCC and is a mandatory industry code that applies to the parties to a franchise agreement. While a local lawyer might be able to have a go at writing the franchise documents the Code is complex and is regularly being updated. It’s therefore imperative that you have your franchise legal documents drafted by a lawyer who specialises in this area of law

Question 5

What’s the difference between licensing and franchising?

Accepted Answer

Licensing is a broad umbrella terms that describes a range of business models where a business owner can leverage their growth. The terms licensing may include: distributorship, agency agreements and franchising. The major distinction between a franchise and other types of agreement which involve some kind of licensing of rights is the issue of the use of the trade name and logo; and business systems. While you can call your business whatever you like – a license, a franchise, or a distributorship the real distinction is NOT in the NAME but in the AGREEMENT itself

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