Franchising a business

Franchising is an exciting marketing method. When it is properly structured and well run it provides benefits and satisfaction for both parties. It is not an easy route to riches for franchisor or franchisee, nor is it a panacea for the ills of a “sick” business.

The establishment of a franchise has to be undertaken with skill, patience and capital. The time scale for establishing a franchise system and preparing it for marketing can be as long as three years and it can take another three to five years before the franchisor begins to see net profits and cash flow.

Why consider franchising your business?

The advantages of franchising for a franchisor may be summarised as:

· The growth of the network is achieved using the financial and manpower resources of the franchisee

· The franchisor is not concerned with the day to day operation of each outlet

· The franchisor’s organisation is compact and can earn profits without involvement of high capital risk

· The franchisor has fewer staff and fewer staff problems

· The management of each outlet is the owner, who will tend to be well motivated to be successful

· It provides wider and secured outlets for products and services

· It enables the franchisor to service national customers using their network of outlets

Points to consider prior to franchising

Franchising your business can be a very successful way of expanding. Some of today’s largest businesses have used franchising to finance and accelerate their growth into world brands. However, franchising must be planned properly. Below are just a few guidelines to consider.

· It just be pilot tested with company-owned and operated outlets

· Business must be successful, distinctive and replicable

· Take proper professional advice – solicitor, banker, accountant and possibly a franchise consultant

· Take time to write an operations manual

· Have first class training

· Focus on franchising satisfaction and profitability

· Keep developing the franchise and maintain standards

· Ensure marketing, advertising and PR is first class

Proving the business concept

The average stand alone small business has a high chance of failure in its first five years of operation. Prior to franchising, a small business should consider operating for at least this time (and certainly no less than three years) to prove it has a viable concept, ongoing market demand, replicable systems, and a management, logistic, marketing and training structure capable of supporting franchisees in a variety of locations. If not, the business may well become another statistic.

Getting proper advice

Experts who are skilled and experienced can give you competent advice relevant to your franchising plans. Be sure to seek out these specialists. Most are members of the Franchise Council of Australia, denoted with representation of the logo.

There is more information available to read regarding buying a franchise and running a franchise.

The Franchise Council of Australia is a not for profit membership organisation that is the peak body representing the franchising sector in Australia.