Franchise Consultants, Sherpa Group understands that each and every business journey is different. Each person has different motivations and reasons for being in business, with dreams and aspirations being as unique as the business that has been built.
Does your vision for the future include franchising?
But while every business possibly can franchise, not every business should franchise. Ask yourself:
Is your business ready to be franchised?
Have you considered franchising as a methodology for growth, nationally or internationally?
By analysing many Australian and foreign franchise models, franchise consultants at Sherpa Group have been able to determine a set of characteristics businesses should possess before considering franchising.
What is Franchising?
Franchising is when you say to someone:
- If you have passion for my business and if you agree to do your best to follow my tested rules, I will grant you the right to run a copy of my business (franchisee drives business)
- We will show you what you need to do
- We will give you the tools to do the job
- We will support you in your efforts to do it
- Together we will grow this business to be bigger and better than the sum of its individual parts
- You will pay a fair price for brand and goodwill and support while you make a return on your investment
The Franchising Code of Conduct (ACCC) also specifically defines a structure as a franchise if it contains all of the following elements:
- An agreement between the parties, written or oral (Contract)
- Payment, up-front or recurring, for providing goods or services (except at wholesale price)
- Provision of a marketing plan substantially determined, controlled or suggested by the franchisor (Control)
- Use of Trademarks, Brands or Names owned by the franchisor
If a business model has these elements it will be judged by the Australian Competition and Consumer Commission to be a franchise, whether the business owner wants it to be or not.
Franchising is strictly governed and the Franchising Code of Conduct is a mandatory industry code of conduct that has the force of law under the Trade Practices Act 1974 and regulated by the ACCC.
The Franchise Council of Australia Limited is the peak body for the franchise sector in Australia, representing franchisees, franchisors and service providers to the sector.
Franchising is not a business itself but a way of doing business. It is an innovative way to distribute goods and services, the most common being business format franchising.
Why franchise?
Franchising offers a growth model that allows businesses to attain a large size in a relatively short period of time due to:
- Efficient leveraging of IP and systems
- Fast growth with less risk and less self-funding
- Learn from talented group of franchisees
- Access difficult markets and increase buying power
- Share success with many others
- Increased marketing spend and power
- Increased brand strength and viability
- Substantial financial rewards after critical mass
A well-run business which has great operating systems and consistently makes profits within a viable market will be an attractive proposition to new franchisees. The same business will also be attractive to its owners if it has a viable exit strategy.
However, all of this is not enough. For a franchise system to be successful it must be possible to train others to operate a similar business in another location and ensure the system will minimise the risk of failure.
Are these features present in your system before making the jump to franchising?
A true franchise system must be driven; then all franchise owners (franchisees) need to do is drive their part of the system. This is the essence of franchising.