Stewart Germann is a franchising lawyer practising in Auckland, and a former Chairman of the Franchise Association of New Zealand.

Stewart Germann

Franchising is a great way of doing business, and it really suits New Zealand. However, great care must be taken in order to avoid potential pitfalls which could prove to be costly, for a franchise relationship is like being in a marriage – easy to enter and expensive to leave. So be prepared to bite the bullet and pay for some professional advice particularly in the legal and accounting areas. In this area, as in many others, you tend to get what you pay for and the cheapest advice is not always the best. You need quality advice from people who actually understand the nature of franchising, so always endeavour to get the best possible advice. And, having obtained good advice, make the most of it. <h2><a name= 'How Do You Choose?'>How Do You Choose?</a></h2> In choosing any advisor it is essential that you can build a good rapport with them and trust them implicitly. You will be paying them for advice, and you must have confidence in the person giving the advice. Having said that, there is no point in using, say, your family lawyer to examine a franchise agreement just because you trust them. Franchising is a specialist area, so you should shop around to choose professional advisors experienced in it. Many excellent lawyers have never seen a franchise agreement before so their advice will be superficial and off the mark. Many excellent accountants do not understand the real value of a franchise brand and system. If you choose inexperienced people, not only will you be paying for uncertain advice – you'll be paying for them to get their experience. So look for people with experience in franchising. Contact the Franchise Association, or look at the helpful Directory of Service Providers in the back of Franchise New Zealand magazine. Ask around, particularly other franchisees or franchisors. Make independent enquiries to ensure that work for other people has been properly done. Ask for an initial meeting with your prospective advisors, sound them out and ask questions. Feel free to interview several. The important thing is that you should only appoint them to act for you once you are happy. <h2><a name= 'Value For Money'>Value For Money</a></h2> There is a saying that you get what you pay for, and this tends to be true with advice. Experience and expertise cost money, so be prepared to pay a reasonable fee to each of your professional advisors. The additional cost of using an experienced advisor will be offset by the quality of the advice given; the cost of a mistake makes the cost of experience look cheap. Most advisors are loathe to work on a fixed fee basis because so many contingencies can pop up without warning. They therefore charge on an hourly basis, which you should find out. If you can't obtain a fixed price, get a written 'guesstimate' of the likely hours involved with fairly rigid parameters to avoid misunderstandings. Remember your advisor will be on your side, but they will also want to be paid for a good job well done. Many advisors ask for some money upfront, which is fair enough so do not be put off by it. The key here is to understand the basis of charging, understand the likely costs, and set money aside in your budget to pay the bills when they come in. <h2><a name= 'A Reasonable Fee'>A Reasonable Fee</a></h2> There is a tendency for people to feel that professional fees are excessive. Where this happens, it is usually because the advisor has not communicated the basis of charging, has not given accurate estimates, and has not kept the client informed during their association. The result is bad for everyone. If you are not happy with the final bill you receive, you should communicate with the sender right away. Ignoring bills and monthly statements does not make them go away; it merely makes people more determined to get the full amount. Your advisor should put everything in writing as to likely costs, and you should be able to rely upon that. If there are unforeseen expenses, ensure your advisor keeps you informed as you go along – not when the final bill arrives. As in franchising itself, communication is all-important. <h2><a name= 'Should You Follow The Advice?'>Should You Follow The Advice?</a></h2> The advice you receive from your advisor will be based upon their professional expertise, their knowledge of the facts in your particular instance, and their researches on your behalf. However, whether you choose to accept the advice or not is up to you. If you disagree or don't accept the advice, then discuss it. Ensure there are no misunderstandings or misconceptions which might lead to the wrong advice being given. Sometimes a gut feeling might tempt you to reject the advice given. If you do this, be prepared to accept responsibility for your actions. Do not expect an advisor to tell you what to do. Their role is to comment on a situation objectively and without emotion, using all their relevant skills, judgement and knowledge of the factors involved. Bear this in mind when deciding to accept the advice, but remember that the final decision is always yours. <h2><a name= 'Built On Trust'>Built On Trust</a></h2> The client and the professional advisor must always trust each other to tell them the whole truth. If you want good advice, you should give them every piece of information you can and always be entirely honest about your circumstances, because their advice will be based partly upon what you tell them. When appointing an advisor, you should have the objective of a long-term relationship with them. The longer they have acted for you, the better they will know you and your business, and the better their ongoing advice will be. People who change advisors regularly miss out on this valuable relationship. <h2><a name= 'A Necessary Good'>A Necessary Good</a></h2> Whatever your business, in this day and age you cannot do it alone - no matter how good you are there will always be concerns outside your own area of expertise. The ideal is to have experienced and trusted advisors who will help to make you more successful. Professional advisors are not a necessary evil, but a necessary good. They can bring additional breadth and wisdom to the purchase or operation of your business. Select them well, use them wisely and treat them as your friends, for they are there to help.

Choosing A Professional Advisor

28 When you're buying or setting up a franchise, its important to get accurate and useful advice. <author>Stewart Germann</author> offers some hints on choosing the right advisors

2009-07-23

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