Investing In A Franchise Business
If you’re thinking of becoming your own boss, investing in a franchise business is one popular option that may be worth looking into.
As you contemplate becoming a business owner, there are many decisions that need to be made regarding the best way to go about this rewarding but sometimes challenging endeavour. You will discover there are two main options available, start your own business from scratch or invest in an existing franchise system.
As more and more large companies downsize, replacing their mid-level employees with computers and outsourcing critical jobs to Asia and Eastern Europe, literally thousands of Australians, many in their 40’s and 50’s are on the streets looking for a “second act” in their careers and many are looking to starting their own business or buying into a franchise. When starting your own new business you will be completely alone from start to finish and need a great deal of knowledge on not only running the business but also on starting the business as well as other aspects of managing a business like finance, writing a business plan, legalities, marketing and hiring good employees.
Many people want to start their own business but have no fresh concepts, creativity or even the energy needed to even decide which business area to start up in. That’s where many decide to buy into a franchise system instead.
Franchising is a recognised and reputable way of doing business in Australia and present in most industry sectors. It has revolutionised retail and has provided small business proprietors with the competitive resources to compete against large corporations.
If you are thinking of buying a franchise then one of the key assets you will be buying is the right to use and trade under an established brand or trademark with the goodwill and loyalty that comes from that brand.
Think about some of the most successful businesses in Australia and you will no doubt visualise the business name and the logo. These will often be referred to as the ‘trademark” of the business.
In all franchise arrangements, the franchisor is the organisation offering its brand under a franchise and the franchisee is the person or organisation that buys the right to operate the business under that brand or trademark.
You are not just buying the right to use the franchisor’s name, in most cases you will be buying a business with established systems and processes and you will have access to the expertise and knowledge of the franchisor as well as benefiting from the brand name, the reputation and the goodwill which attaches to that particular business and brand. Buying a franchise means that you can establish your own business without having to go it completely alone. You won’t have the costs of brand development like setting up logos and artwork, websites, brochures, business cards, uniforms and other associated marketing costs. You will receive on the job training, which may include products specific training, sales training and business training.
There are literally thousands of businesses being offered in the franchise form and many successful franchise systems that act responsibly and support their franchisees. Franchisors have a vested interest in their business, staff training, research and development and look at ways to improve their system for the benefit of the brand, their consumers and their franchisees. These franchises are most likely to be members of the Franchise Council of Australia – FCA. Its members have committed to following the mandatory Franchise Code of Conduct which increases protection for franchisees of unscrupulous operators. If you are considering purchasing a franchise part of your due diligence is to clarify the group is an FCA member.
Lastly joining a franchise means being part of a team and requires working together with the franchisor and often receiving help from other franchisees. In a franchise system, you are not alone. Many franchises regularly survey their franchisees. Ask any prospective franchisor for their survey results or even ask if you may contact other franchisees to confirm their satisfaction.
For further important information on franchising visit www.fca.com.au.
According to Nathan Stanogias, a journalist for Cirrus Media Group, the following are the 8 Traits of a Great Franchisor:
- A supportive attitude
- Good communication
- Strong listening skills
The state of franchising in Australia as reported by the FCA bi-annual survey
Statistical surveys are conducted bi-annually by the Franchise Council of Australia since 1998 and in 2016 revealed:
- There are approx. 1120 business format franchisors in Australia
- There are an estimated 79,000 units operating in business format franchises
- More than 470,000 people are employed directly in franchising
- Sales turnover of the entire franchising sector was estimated at $146 billion
- Fully 90% of franchise systems originated in Australia
- Some 32% of franchisors have entered international markets
- Only 1.8% of franchisees were involved in substantial disputes with franchisors
- Fully 37% of franchise systems engage in online business with clients