Franchisees Missing Opportunities to Save Big Bucks When Buying a Business
Getting advice at the right time, from the right sources, can be critical to prospective new business owners in making decisions that can cost them dearly.
Franchise Advisory Service Director Steve Champion says, “We provide the professional advice the franchisee needs to make the right decisions, including helping them understand the likely level of labour costs that will apply to their business. We can also give them advice on employee rights and entitlements that arise on the purchase of a business, and when they might need to talk to their lawyers to make sure their Sale of Business Agreement appropriately addresses all the issues required.”
Champion says that what happens with a host of employee entitlements when buying an existing business, is largely governed by legislation - but legislation which gives the 2 sides to the business sale the ability to negotiate what happens with most employee entitlements.
Transferring Employee Entitlements
In almost all areas of employee entitlements, with the major exception of long service leave, the vendor and purchaser are free to negotiate as to whether the entitlements transfer with the business, or whether employees start as new employees.
"Almost invariably, new franchisees who have already entered into a contract to buy a business call us to talk about employee entitlements - when it is probably too late to change what will happen.
"It is being assumed the 2 parties will be advised by their lawyers to offset against the purchase price the cost of transferred entitlements. However, what happens if the purchaser hasn't used a lawyer, or the lawyer they did use isn't familiar with transfer of employee entitlement rules arising on a sale of a business?"
Failure to disclose these issues could possibly be putting franchisors in breach of disclosure obligations under the Franchise Code where they are franchising the particular store. "This has led some franchisors to engage us to provide advice to prospective franchisees looking to buy a new outlet or other business."
"Money is being left on the table due to ignorance. And it can be very large amounts involved."
“In one situation, we were advising both the purchaser and the vendor franchisees about these issues throughout the afternoon on which they were about to exchange contracts, because either their lawyers hadn’t pointed out all the issues to them, or possibly because the incoming franchisee hadn't sought advice.”
Champion says it is important to get the right advice well ahead of deadlines, when a whole lot of other issues are demanding attention by the incoming franchise owner.
Contacting ER Strategies
Contact with ER Strategies and its Franchise Advisory Service can be made on 1300 55 66 37, or 02 8907 3888 if calling from Sydney. The new franchise website is at www.franchiseadvisoryservice.com.au, and interested businesses can register for free newsletters and access to articles on the website.
