Franchising Tips and Pitfalls – Part 3


I’d like to thank you for continuing to read my articles and I hope that you’ve been able to glean some useful information. This time I’d like to share some information regarding a practice in franchising known as “kick-backs”.

Franchisor Kick Backs

Now kick-backs aren’t illegal but failing to disclose them is against the Franchising Code of Conduct.

Your Franchise Disclosure Document should contain the following information:

  • Whether the franchisor, or an associate of the franchisor, will receive a rebate or other financial benefit from the supply of goods or services to franchisees; and,
  • The name of the business providing the rebate or financial benefit”; and;
  • Whether any rebate or financial benefit referred to in (number or reference of the above clauses) is shared, directly or indirectly, with franchisees.

Coffee Franchise

This may seem like a minor point but let’s take a scenario where there are 50 coffee franchises, and each is consuming 50 kilograms of coffee per week. You’d like to know if the franchisor was getting $5.00 per kilo from the supplier, wouldn’t you?

Put the calculator away – it’s $12,500 per week! A very nice earner if you can get away with it. Imagine the extra marketing that could be achieved across the group with an extra $650,000 per year?

Of course, this isn’t limited to food and beverage businesses – it could happen in any industry.

The company that I’m associated with has introduced its members to many experts in various fields so that we can avail ourselves of their services. It’s been made abundantly clear that they have been introduced because they are the best in their field, not because they pay commissions. They don’t pay commissions or kick-backs – they work with their clients to provide the very best service in their respective fields. Personally, I’ve always felt good about recommending someone to do a job because they’ll do it properly, not because there’s something in it for me.

Franchise Recommendation

As I’ve mentioned in previous articles, there’s hundreds of great franchises and other businesses out there and there will be one for you if that’s what you’re after. Just make sure you ask the right questions, get the right qualified advice and don’t let a glossy brochure and a slick sales spiel induce you to sign anything.

This is the third in a series of articles on franchising so please watch this website for further updates.

In my next article I’ll be discussing some things to be wary of when purchasing any business, not just a franchise.

If you would like some one-on-one advice or guidance, don’t hesitate to contact Phil Roberts at

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