Legal risks are common to all businesses, and the management rights sector is no exception. This is why it helps to be informed, so you can avoid a disappointing outcome.
What Management Rights
Letting rights is a good example. Before you start acting as a letting agent, you need to have a valid letting appointment (Form 6) to charge the owner. If you operate without a letting appointment, the owner can take back all the money they have paid you. Having a Form 6 will declare the income you’re earning and add capital value to the business.
Another example is off-the-plan management rights sales. There is more risk associated with this since the final nature of the business depends on the sale and settlement process, including what happens during it. Add to that the fact that during registration, it will not appear as an existing management rights business. Off-the-plan sales are more likely to take place when the business is booming. The chances of things going wrong are more likely during this time, as well.
Regardless of the management rights you're planning to get in Australia, what you need to remember is that any kind of business deal has an element of risk. Put simply, if you’re about to strike a deal for $X and you expect a return of $Y but there is a risk of $Z, you need to negotiate terms where you will either subtract $Z or a factor of it from $X. Getting the entire $Z off the purchase price will depend on your negotiating skills.
Remember that not all the returns of a management rights business are of a financial nature. You will find factors, like lifestyle and residence, influencing the decision to purchase. This is different from a scenario where you place money in a term fund and what matters is the variation of the interest rate.