it might be an exciting prospect to buy a business and stay in Australia. Investing into a franchise may seem the way to go, however, like any business decision, this one must not be made lightly. You will find three further resources attached to read further up about buying a franchise, which I recommend you read. You can make an informed decision, and be prepared if you choose to proceed.
Personally, I have owned and managed three cafes in the past 15 years, two of them independently whilst the current cafe is a franchise. I can therefore make some comments which might be helpful.
1. Is this your passion?
If you would like to come to Australia, buying a franchise may seem like the easier option as everything is seemingly in place. Before you buy a franchise or any other business, however, you have to ask yourself the question: “Is this what I love doing?” Once you buy into a franchise, your life is no longer your own as the business demands your attention 24/7. Instead of living your dream of being a small business owner, you may find yourself living a nightmare if you lack the major ingredient to success; passion. Make sure you buy into what you feel passionate about, which brings me to the next point.
2. How much do you know?
Know and understand the product that you sell. This may sound like common sense, however, it surprised me to discover how many franchise owners do not drink coffee and have little interest or knowledge about the coffee industry. Why on earth would you buy a cafe? A lot of people who buy a franchise are fulfilling a long held dream to work for themselves, without really knowing the type of business they would like to enter into. Unfortunately, franchises tend to draw people who have little or no business experience. They have often come straight from a job, or they are buying themselves or family members a job.
Product knowledge is essential in marketing your product, and in a franchise you have to think about marketing and customer sales. Whilst buying a franchise might help with the branding and structure setup, it has no obligation to do the marketing for you. Often, people who buy into a franchise expect too much from the franchisor and do not realise how much running of the business is left up to them.
Whilst the new owner will usually get training in the systems and procedures when they buy the franchise, they will usually be responsible for finding and training their own staff, as well as day to day running of the business with little support from the franchisor.
3. Due Diligence and Business Plans.
Boring maybe, but oh so important! Before you buy a franchise make sure you can afford it. Have at least six months saved in an emergency fund to cover those unexpected events. Buying a franchise, contrary to popular belief, is not a licence to print money. It is important that you have a viable and practical business plan so there are not too many surprises and no unrealistic illusions. Make sure you check the outgoings and do not just look at the cash flow; this can mistakenly be presented as profitable. Cash flow and profit are not in the same league. Things to take into account include your hidden and fixed costs such as rent, water, electricity.
Royalty fees, which you have to pay to the franchisor, is usually a percentage of your gross income before tax. Be prepared for this franchise fee, which is money to be paid upfront for the use of the franchise licence (anything from a few thousand to a million).
It will take time for you to establish yourself in the business. Mistakes will be made, if however, you have that financial cushioning, it is one less thing to worry about.
Be very aware of the contract obligations you have with the franchisor. Be clear who owns the lease of the premise you operate from, and the conditions attached to those by the landlord. Understand the “take back” clause and when this can be enforced. Make sure you read and understand the fine print, as well as know and understand what you are signing for. Better still, spend money on lawyer. It is well worth the investment that will save headaches and surprises later on. Never sign for something in your enthusiasm that you do not understand.
4. Is there room for innovation?
This is something you might not think about, however, as you settle into your franchise, you may discover certain products that sell better in your local area. Some franchises can be quite limiting in regards to your personal flair and choices. It is for that reason, we bought the franchise we did. It allowed us to be creative in our food choices as well as in our decorative style, however, we are still obliged to purchase the core products, and any other branded product. Find out how much control you have in running your franchise, as buying into a franchise is like entering a partnership in business, so it is important you are a good match!
5. Make sure to talk to other Franchisees.
Prior to signing on the dotted line, talk to the other franchisees. Ask them questions about their experience of being a franchisee, and given the choice would they purchase this franchise again?
Owning a franchise has its advantages such as buying power and branding. Just make sure you are prepared and really understand what you are buying. Remember, buying a business is always much easier than selling one. I like to use the analogy of giving birth; once out, you are “stuck” with it and you better prepare yourself for the long haul. We love coffee and we love the cafe we operate. None of this would be possible if we did not have that passion!