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Should I buy a franchise?

I have just been offered a golden handshake from my boss. He is cutting back and I am thinking of buying a franchise as I am too old to work for someone else but too young to retire. I might have to borrow to buy a franchise but within three years I will be able to access my super. What do you think of franchising?

Franchising can be a dream but it also can be a nightmare. It will be hard work and long hours, but if you choose the right system, it could prove to be a great decision and investment.

That said, I worry about people trying to buy themselves a job. If the reason is to use a franchise to replace your job, make sure the business you choose ticks all of the boxes. Sometimes people looking for a ‘job replacement’ via a franchise will choose cheap franchises. These can be good, but they can also be disappointing.

For a cheaper franchise, you want to see a well-known brand name, which advertises and markets effectively. Make sure you talk to five to 10 franchisees in the system you are thinking about and seek out a lawyer and accountant who have experience in franchising.

Check with the Australian Competition and Consumer Commission (ACCC) to see if the franchisor has disputes with franchisees pending, or if there has been a history of problems with franchises.

I recall one business in Cairns where the franchisor was always churning people in and out of the franchise business. A franchise consultant recently told me that you need to spend one hour for every thousand dollars you will spend on a franchise. So, if the franchise costs $100K, you will need to put in 100 hours — or 12 eight-hour days before you're in a position to make a sound decision. 

In the age of search engines, it’s easier to create a complete dossier on any possible business you want to buy, and I strongly recommend you do this. Treat it like an investment and you are more likely to spend your money wisely.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice. 

Published on: Tuesday, May 11, 2010

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