Flexibility in choice move

Ensure you research thoroughly before taking on a franchise, writes Max Newnham.

Ensure you research thoroughly before taking on a franchise, writes Max Newnham.

Lane Cove mother-of-two Nicole Stapleton bought into a mortgage-broking franchise to have the freedom of being her own boss. Having worked as a chartered accountant for Diageo and McDonald's, she knew following the arrival of her second child that stepping back on to the corporate ladder would not give her the flexibility she needed to combine work and motherhood.

Her financial experience meant mortgage broking was a relatively easy transition, though she embarked upon a rigorous due-diligence process before deciding which business would get her vote. In February last year she decided on a Mortgage Choice franchise.

"One of the best things I did was to speak to existing franchisees who had similar circumstances to me," she says. "Gaining an insight into the industry from women who successfully juggle being the primary carers of their children with running a successful, flexible business from home made me realise Mortgage Choice was a good fit for me."

When it comes to going into business for yourself, franchises have become a popular option but there is no guarantee of success.

In 1994, there were 24,500 franchised outlets in Australia this grew to 44,800 in 1998, with a high of 71,400 in 2008. The figure dropped to 69,900 last year, according to Griffith University research.

The good news is that the number in dispute with their franchisor has dropped from 2 per cent in 2008 to 1 per cent in 2010.

Australia is one of the few countries that require mediation in a dispute between franchisees and franchisors. A federal government-funded service, the Office of the Franchising Mediation Adviser (OFMA), has been set up to handle disputes. A mediator with the OFMA, David Newton, says the main cause of disputes is "the unrealistic expectations of both franchisors and franchisees". This often arises because franchisees don't get enough advice before they sign up.

The acting Victorian Small Business commissioner, Peter Lisle, advises potential buyers to "use different coloured highlighters to mark the contract with what their obligations are in one colour and what the franchisors' obligations are in another". Then you can clearly see what you are required to do, how much you have to pay, what the franchisor must do and whether on balance the agreement appears fair.

A deputy chairman of the Australian Competition and Consumer Commission (ACCC), Dr Michael Schaper, recommends aspiring business owners complete the franchising pre-entry program run by Griffith University. The 13-week course covers how to evaluate business opportunities, legal agreements, site and territory selection and managing staff.

Stapleton says the downside of working from home in your own business is that it is hard to switch off. "The temptation is always there to work at night and on weekends because there is always something you can be doing," she says. "Holidays can be very challenging as it is hard to forecast the demands on your workload in advance."

Those thinking of buying into a franchise should do their homework and be realistic about financial projections, she says.

"All the research I did in the beginning has certainly paid off," she says. "I have recouped my initial investment in the first year. My business is based on word of mouth, with a lot of my leads now coming through my existing customers' friends, colleagues and families."

Funding Your Retirement by Max Newnham is available in bookstores and as an e-book.

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