Franchising is becoming an increasingly popular way for businesses to expand their brand, products and services.
In Australia, franchising is a booming industry with over 1,100 franchise systems and around 65,000 franchise units generating over $170 billion in revenue annually. If you want to get in on this lucrative money train, you may be thinking ‘How do franchises work and what are the benefits and drawbacks of owning a franchise?’. In this article, we’ll answer your questions, including the business and ownership aspects.
How Does a Business Franchise Work?
A franchise is a business model in which a company (the franchisor) licenses its brand, products, services, and sometimes operating procedures and other factors to an independent entrepreneur (the franchisee) in exchange for a fee. A franchisor will also often receive ongoing royalties.
The franchisee then operates their business using the franchisor’s established system, procedures and standards. This allows the franchisee to benefit from the franchisor’s established brand recognition, customer base and operational support while retaining the independence of owning and managing their business.
To start a franchise business, a franchisor typically develops a business concept, including the products and services, branding and operational systems. They then recruit potential franchisees who are interested in owning and operating their own business using the franchisor’s model. The franchisor provides training, ongoing support and access to marketing and advertising materials. In return, the franchisee pays an initial fee and ongoing royalties.
Franchising is a popular model in the food and beverage industry, with popular franchises including Aussie brands Roll’d, Hungry Jack’s and Guzman & Gomez, as well as McDonald’s, Domino’s, Subway and KFC. However, franchising is common in almost every sector, including retail, hospitality, automotive, healthcare and more.
How Does Owning a Franchise Work?
Franchising your business can be an attractive option if you’re a business owner and want to expand your brand while maintaining a level of control and support. Franchising is also a great idea if you’re at the point where you want to expand but don’t have the capital or manpower to do it alone. The benefits of franchising include but are not limited to:
Lower risk – The franchisee is responsible for the financial investment in opening and operating the franchise, which can lower the franchisor’s financial risk significantly. In fact, a franchisor can often achieve quite a high financial gain even before the franchisees have begun trading.
Brand expansion – The franchisor benefits from the franchisee’s expansion efforts, which can help to grow your brand recognition and reach. In many cases, your franchisees’ advertising investments benefit your whole franchise network without you having to lift a finger.
Operational support – The franchisor provides ongoing support in areas such as training, marketing and operations, which can help the franchisee run their business more efficiently and effectively. This benefits your brand and your whole franchise network.
How Do I Franchise My Business?
To franchise your business in Australia, there are a few steps you’ll need to take. First, ensure that your new or existing business model is easily replicable and can be adapted to different markets.
Next, you’ll need assistance from a vastly experienced franchise consultant who can guide you through the wide-ranging areas involved. This includes the critical aspect of optimising your franchising legal documents and contracts, as well as franchise operating systems. Unfortunately, this can be a costly step if you use traditional lawyers, but our easy and affordable Franchise Success Path can achieve the same results in a streamlined way for significantly less cost to you.
After the above steps, it’s also important to establish a support system for franchisees, including training and ongoing support, which our Systems2Grow system also helps with. Once you’ve developed your franchise system, you can begin recruiting and selecting franchisees to operate under your brand. You’ll typically need to provide training and support to ensure that they are equipped to operate their franchise successfully and in compliance with the law and your established systems. Thankfully, our professional team of experts have decades of experience in assisting with these issues.
If you’d like to have a chat about how we can help you bring your franchising dreams to fruition, call us on 1300 960 136 or contact us via our online form and we’ll be happy to help.