Major types of franchise models:

Business format franchise

• This is the model that people most commonly think of as a franchise. As the franchisee you would be given the rights to use the franchisor's intellectual property in your own business. An example of this model is a fast food outlet.

Product franchise

• This is where the franchisee sells the franchisor's product from a wholesale or retail outlet. As the franchisee you would be given exclusive rights to sell the product within a specific area. An example of this model is a motor vehicle dealership.

Processing or manufacturing franchise

• In this model the franchisee produces the product. The franchisor provides an essential ingredient or "know-how" to the franchisee. An example of this model is the soft-drink industry.

Buying a franchise sounds easy in that the name, brand and concept is already in existence but in fact there are so many things to consider when buying and operating a franchise including:

• Initial capital outlay

• Ongoing franchise fees

• Cash flow projections

• Potential shop fit out and equipment costs

• Financing

• Type of support the franchisor will provide

• Type of industry the franchise operates in and the risks and competition

• Ensuring franchise agreements are reviewed properly

• Talking with current and past franchisees

• Due diligence.

The value that one pays for the franchise business needs to be assessed and evaluated to ensure it is profitable and provides a good rate of return on the investment by the owner. Getting the proper advice when purchasing or selling a franchise business is very important.

Having a good accounting system ensures the smooth running of a franchise business. It’s important as some franchises are required to provide sale figures for franchise turnover fees and having the correct systems means spending as little time as possible with their bookkeeping, accounting and paperwork once the business finishes trading for the day.

At KPMC we have specific experience in dealing with both franchisors and franchisees of many different small and large franchise businesses that many general accountants don’t have. We understand many of the franchise models and systems. We will ensure you have the correct business structures in place when buying and operating a franchise including implementation of easy to use and modern accounting software and systems to help improve profitability and business development. Contact us now to see how we can help your franchise.

If you are a franchisee or are considering buying a franchise, call us on 0425 365 558 or email us info@kpmc.com.au