Franchising is one of the most popular and fastest-growing components of the Australian business sector. A 2014 survey of franchising in Australia revealed a sales turnover of $144 billion, and more than 460,000 people directly employed in the sector.
As the most common form of franchising in Australia, the business format model involves the owner of a business providing products or services (the franchisor), assigning to an individual (the franchisee) the right to market and distribute those products or services, and the right to use the franchisor’s business name to do so. In 2014, there were approximately 1,160 business format franchisors operating in Australia.(1)
A key benefit of buying into a franchise business is that a franchisor has often already invested in creating an established and, in some cases, well-known and respected brand. Some franchisors will also provide franchisees with significant business support including marketing assistance, operational guidance and advice, and training and skills development. Franchisees can also benefit from increased opportunities to come together locally and nationally to share their franchising experience and learning.
For all the benefits, however, franchising is not a “soft” business option, and requires the same level of planning and commitment as any other business model. Also, a franchisor often requires its franchisees to adhere to strict standards regarding the fit-out of business premises, and other aspects of business administration to uphold the success of their brand and reputation.
Both parties usually sign a franchise agreement detailing any such requirements. The agreement may also cover the rights and responsibilities of both parties, including payment of fees, the area in which the franchise can operate, leasing arrangements, termination and renewal clauses, and the length of the agreement.
Through its Business Development and Assistance Program, IBA assisted Karen Seage (Snap Underwood, Brisbane), and Wendy Brookman (Fernwood Women’s Health Clubs, Canberra City) to negotiate their franchise agreements. IBA also provided both women with business finance and support, including mentoring from an IBA business consultant.
Karen and Wendy agree that seeking appropriate legal and financial advice from an accountant, lawyer or other business expert is vital before signing any legal document.
Both also advise careful consideration of broader personal goals and business objectives such as: the alignment of your personal and professional values with those of the franchisor; the level of control you will have over your own business; the ability of your franchise to grow and match your long-term business goals; and the level of support and training that will be available to you.
|Karen Seage, Snap, Brisbane, Qld: "If you had your own little print shop or ad agency you would need to be thinking about organising training yourself. I think being part of a franchise keeps you moving with the times, and makes it easier to keep up with technology, the latest trends in printing and so on". Read Room to move part 1: Karen Seage.
|Wendy Brookman, Fernwood Women's Health Club, Canberra City, ACT: " I think when you are looking at a franchise you need to look closely at the brand – do you believe in it? That’s going to be your selling point, and if you aren’t happy about taking on the brand it’s going to show to your customers or clients". Read Room to move part 2: Wendy Brookman.
The Franchise Council of Australia is the peak body for the franchising sector, and frequently holds franchising expos and workshops.
The Australian Competition and Consumer Commission has a Franchisee Start-Up Checklist containing useful information on your rights and responsibilities as a franchisee, available for download.
1. Franchising Australia 2014, Asia-Pacific Centre for Franchising Excellence, Griffith University, with the Franchise Council of Australia; Lorelle Frazer, Scott Weaven and Anthony Grace, 2014.