If you’re looking to purchase a franchise, what you’re doing is buying a business with an established name, marketing and operating procedures.

Prospective franchisees must also recognise that entering into a franchise agreement means you’ll need to follow the franchisor’s system of running and marketing the business.

As Business Victoria points out, there are four main types of franchise:

Product and trade name franchising

This type of franchise grants individuals the right to distribute a manufacturer;s product within a specific territory or at a specific location, generally with the use of the manufacturer's identifying name or trademark in exchange for fees or royalties.

Manufacturer-retailer

The franchisee sells the franchisor’s product directly. This type of franchise includes car dealerships.

Manufacturer-wholesaler

The franchisee manufactures and distributes the franchisor’s product under license. Examples include soft-drink bottling arrangements.

Business format franchising

This category is broken down into two sub-categories:

Wholesaler-retailer

The franchisee purchases products for retail sale from a franchisor and sells the products tot the public. Examples include hardware and automotive parts stores.

Retailer-retailer

This is what most people think of when they hear the term ‘franchise’. The franchisors markets a service or product under a common name and standardise system through a network of franchisees. An example would be McDonalds or Subway.

According to Marsh & Maher lawyer and franchising law expert Marianne Marchesi It is important that legal and accounting advice is sought from professionals with expertise in franchising before purchasing a franchise.

“Franchising is a niche area requiring specialist knowledge, therefore it is important to obtain appropriate advice,” she says.

“It is also a good idea to become familiar with the (Franchising Code of Conduct) prior to franchising your business or entering a franchise agreement.”