Franchisees, do your due diligence before diving in

Franchisees who have signed up with ‘Jump!’ Swim Schools (Jump!) claim to have found themselves paying thousands for a swim school without a pool to operate from. The ongoing legal battles are a valuable reminder to franchisees – do your due diligence before diving in.

FAQs on the company’s website state that benefits for franchisees include “receiving a turnkey swim school fit-out” with a total initial investment required of around $180,000, plus GST. Operating 68 swim schools in Australia, New Zealand, Brazil and Singapore, the business has been operating since 2010 and to all intents and purposes, seems to be a safe bet.

Many who have bought into the business say differently, with some waiting more than two years for their pool to be built, resulting in legal action from the disgruntled franchisees to progress their dream or terminate contracts.

Jump! has said in a statement that “Unfortunately, there is a high level of regulation involved in opening a swim school that requires approval from multiple third parties and can be subject to a range of approvals and refusals.

“Jump! Swim Schools has little control over the time frames to opening due to these third parties including local councils, private certifiers, health departments as well as a needing the landlord to consent to the building being held vacant whilst we await all the necessary approvals.”

Tradies have also started legal action in an effort to secure what they allege are outstanding payments for services and works undertaken.

What should you do to avoid the same problem when buying into a franchise?

In a nutshell, do your research before jumping in!

  • Some franchisees have claimed their contract is stacked in the Jump!’s favour – get a lawyer and an accountant who specialise in franchising to review all paperwork before signing and handing over your hard-earned cash. Investing in expert advice can save you from making a very expensive mistake.
  • While you’ve got a lawyer on board, ask them to look into any legal action (past or present) that the franchisor may be involved in so you’re across potential issues.
  • Talk to the council. If, in the case of Jump! franchisees, you know that council permission will be required for your premises, have a chat with the planning department to work out what will be involved so you know what the process and potential challenges will be.
  • Ask other franchisees (past and present) about their experiences. If you’re not provided with contact details, or discouraged from talking to anyone else within the franchise, this should be a red flag.

Other steps to take include:

  • Conducting a competitor analysis – who is in the area already that could provide a threat to the establishment of your fledgling business? This could include fellow franchisees.
  • Looking into the industry. Is the industry itself undergoing change with legislation or other external factors such as changing technology that may impact the viability of your business (remember all those video stores that used to exist?).

For more information on what you should look at when buying into a franchise, please contact Racha Abboud.