Franchise Fit Outs

Following is a guest post on the topic of Franchise Fit Outs by Peter McLaughlin, who is a lawyer experienced in franchising, and a member of FAN. One of the advantages of buying into a franchise is the ability for a franchisee to leverage from an established and successful business. In order to maximise the effect of the franchise system, those franchises that operate from retail premises such as a shop should have the same look and feel across all stores, highlighting the replication of a singular brand and product.

The Franchise Agreement will usually contain a provision as to whether the franchisor or the franchisee will fit out the shop to achieve this cohesive, predetermined look.

Fit Out by Franchisee

Where the franchisee is required to coordinate the fit out of their own shop, they must ensure that this is carried out in accordance with the franchisor’s specifications. A Fit Out Manual will usually exist outlining the franchisor’s precise requirements. Often a franchisor will also advise of an approved shopfitter that knows the brand and business and is recommended to carry out the work.

The final fit out must usually obtain the franchisor’s approval and pass a final inspection prior to commencing operation of the franchise. Franchisees are recommended to read the Franchise Agreement carefully to understand what is required of them in this process.

Fit Out by Franchisor

Alternatively, the franchisor may assert that they will co-ordinate the fit out on the franchisee’s behalf. In this circumstance franchisees should ensure that they are involved in the process and check that the quotes of the shopfitter are reasonable.

It is also common for franchisors to supply a “turnkey” package. This is when the franchisor grants the franchise, supplies a fully fitted out shop and turns over the keys to the franchisee to operate, all in return for the payment of a fixed amount.

What Happens in the Event of Relocation?

Most site-based Franchise Agreements allow for a franchisee to conduct business only at a specified location. The agreement should however make provision for the situation where the premises are destroyed, rendered unfit or if the lease expires or is terminated without fault on the part of the franchisee. The agreement would usually allow a franchisee to relocate, but will also impose conditions on that relocation.

What Should I Do?

Whether you are a franchisor or a franchisee, the key to benefiting both parties and getting the shop fit out right is clear communication.

Franchisees should ensure you read your Franchise Agreement thoroughly and understand what is required of you in regards to your shop’s fit out.

Franchisors should be open and very clear in regards to your fit out standards to avoid any confusion or misrepresentation of your brand.

For any assistance regarding the drafting or reading of Franchise Agreements please contact Peter McLaughlin on 3852 5055 or at peterm@redchip.com.au.

No longer flying solo

Why would you give up the freedom of 'flying solo' to join a franchise network? Despite its popularity, some people find the solo business life means long hours and a constant struggle to generate business and stay up to date. For them, a franchise in a related business business could be a good step. In recent years the business soloist sector has boomed. It includes casual soloists making something to supplement their day job, freelancers, and a large number of people working on their own as consultants of some variety.

Some of these soloists are the classic 'consultants' - people who make their living moving from one role with a company to another, often experts in a particular area, hired to fill a short term need. Some are the classic kitchen table startup; people with an idea - often for an online business, having a crack at it from home.

But many soloists have skills that could fit within a larger business. They include bookkeepers, accountants, therapists of various types, tradies, designers, communications and marketing people, mortgage brokers and financial planners.

There are a host of reasons people head down the solo track. Many, I suspect, simply to make a buck; having found it hard to find a job in a business that suits them. There's also that 'stuff the boss' idea; the dream of being free to do your own thing, to choose your working hours, benefit from your own hard work without the boss taking a slice.

Some love it, and make a decent living. But sometimes the dream isn't what you want or need.

It's not easy to create a sustainable business when you are the business. Perhaps there will be times of plenty, but almost inevitably there will also be times of scarcity. That's because the solo operator is either 'selling it' or 'making it', and you're limited by the number of hours you personally can work.

There are other challenges for the solo business person. With only you in the business it is hard to generate new ideas, solve problems and innovate. Possible - yes, but often much harder than when you have others working with you.

Perhaps you want the opportunity to grow your business bigger, or to have the company of others in the same business as you. Perhaps you're tired of the marketing slog that's an essential part of business.

If flying solo is losing its shine for you, it might be worth trading some of your apparent freedom and independence in exchange for what a franchise system can bring you.

Franchising isn't for everybody, and not every franchise is a good business to be in. But my interest in the soloist to franchisee journey was spiked when Robert Gerrish, who has made helping soloists his business, contacted me to record a podcast about franchising.

For some soloists, the move to a franchise could be worth considering. Here are some reasons:

• Many franchises have a good stash of marketing resources you can plug into. This will save you time and possibly money.
• Other franchisees can be a source of business tips and help, or simply someone 'like you' to talk to. It can reduce the loneliness factor.
• Franchises may provide the training which you need to stay ahead in your sector.
• Some franchises provide 'career paths' that help you move beyond solo operator to business owner with a team of staff. I'd like to see more franchisors focus on this.
• A franchise business can have a sale value whereas a solo business can be very hard to sell.

Of course, there are arguments on the other side, and you must must must do thorough due diligence before you make the move. But if the solo life isn't all you want or need, a franchise may be worth a look.

You can listen to the Flying Solo podcast here

https://soundcloud.com/flyingsoloau/53-is-buying-a-franchise-a-smart-move

Why choose a franchise accountant?

The Franchising Code of Conduct states prospective franchisees must be advised to obtain independent accounting and business advice. But is it really necessary? Who should you get advice from, and what should you ask? Let’s take a look… As a franchisee, your income will depend on the financial results of the business, you’ll be investing your own money and probably taking on debt. Therefore, it’s wise to carefully consider the financial implications.

Franchise Disclosure Documents contain important financial information that (when used and understood properly) can help you make an informed decision. However, it’s not always easy to make sense of – especially for people who are unfamiliar with franchising and financial matters. That’s why it makes sense to consult an accountant who understands franchising.

The right accountant can be a great help in your franchise journey. They can help prepare financial forecasts, identify risks and bring an independent perspective. But when it comes to franchising matters, all accountants are not the same!

It’s important to understand there are different types of accountant. Some focus on personal income tax - you might have used one to do your own tax return. Others mainly work with established businesses. A few specialise in franchising; they understand the special features of a franchise that don’t apply in other businesses.

Once you’ve found an accountant, what advice are you looking for? An important part of their role is to help you understand the financial aspects of the business. They should be able to help you answer these three questions:

1. How much will it cost to start the business?
2. What will it cost to run the business day-to-day?
3. What sales are needed to cover the costs?

Your franchise accountant should also highlight the main financial risks relevant to your circumstances.

The financial side of buying a franchise is really important and needs to have your attention. That’s why the Franchising Code recommends you get advice on this aspect, and it’s best to choose an accountant who understands franchising issues.

This article was first published on www.franchiseaccounantsnetwork.com

Saving to finance your franchise

Mixed in with excitement at the idea of becoming a business owner are always some financial concerns. Saving to finance your franchise will help reduce those concerns.

Questions that people ask are ones like:

How much will it cost? “How can I afford it? How will I pay the mortgage and the bills? How much can I make? How long before I make money?

These are natural questions, and they are important. That's because you'll need to invest some of your own money to get the business started and to provide working capital to fund its day-to-day operations. You will also need money to live on until the business makes enough to pay you a wage.

So, the very first step in starting a business is to build up your savings so you have the money to fund it. Having these savings will help you feel more confident as you approach starting a business, because you'll know you can pay the bills for a time, while things get off the ground.

Here are some practical steps to help you start saving to finance your franchise.

Reduce debts and increase savings

There are two parts here: less debt and more savings. Both are important!

Lower debt levels give you more flexibility to cope with the financial ups and downs of business. You'll also need savings to help you fund the initial start-up costs. Even if you get a loan to help your purchase your bank will still want to see some ‘skin in the game’. Savings will also give you money to live on while the business builds up to the point where you can take a wage from it.

Reduce expenses

Reducing your day-to-day expenses will allow you to save money, and live on less as your business starts up. This may lead to some tough choices for you and your family, but initial financial sacrifices are part of the price to pay for financial independence. Think about where you currently spend money and work out some areas you can make savings.

Be realistic about costs 

People who have got into business often say it cost more than they initially expected. So, when you're planning how much you'll need to fund your business, it's a good idea to allow for extra costs and a slower start-up than your initial optimistic estimates. Ask your franchisor and other franchisees for information to help you work out a realistic range of costs.

It's also helpful to ask an accountant to prepare financial projections and a cash flow forecast. Ideally you want to find one who is experienced in franchising and is realistic as well as supportive of your desire to start a business.

There are no guarantees in business but these tips will help you lay strong financial foundations and increase your chances of achieving your goals.

A version of this article first appeared in Franchise Buyer Magazine. It was originally posted on www.smartfranchise.com.au and was written by Kate Groom, who is a co-founder of the Franchise Accountants Network.