Franchising is an innovative, effective and proven strategy for business operation and expansion whose short history has been characterised by innovation – in both the application and the development of the franchise model.

In relation to application franchising has long expanded beyond its fast food origins in the US in the 1950s.

My engagement with the Australian franchising sector now stretches over four decades – from just a few years after McDonald’s and KFC introduced not only their distinctive fast food concepts but, and more importantly, a new way of doing business which has revolutionised the Australian retail landscape.

In those early days the greatest excitement in franchising was watching it expand from fast food to other consumer sectors but we now know that any business that can be operated under management can be franchised and the more compelling questions are should it be franchised and how.

Because franchising is a strategy for carrying on a business it can be applied at various levels in the distribution chain – not only to retailer/retailer transactions which account for the majority of franchise systems but also to manufacturer/wholesaler and manufacturer/retailer and wholesaler/retailer transactions.

Australia has a rich and diverse franchise sector comprising over 1100 franchise brands. It is not only consumer goods and services which are supplied through the franchise model but also business to business services, professional services and government services.

But it is not only the application of franchising to previously unfranchised sectors that has characterised the development of franchising – it has been the development of the model itself.

The basic franchise concept is not particularly complicated – a franchisor with a proven business system licenses a franchisee to use the system, in a controlled manner, in the franchisee’s independently owned and operated business.

It is an inherently practical strategy which, in the words of Martin Mendelsohn, “evolved from the solutions developed by businessmen in response to the problems with which they were confronted in their business operations”.

The history of franchising is one of innovative development as the basic franchise model is applied through a range of techniques beyond the understanding of the original founders. Master/sub franchising, area development franchising, multiple unit franchising, and combination (co-branding) franchising all developed to accommodate commercial challenges and are driving the relentless growth of franchising.

While franchising is, in most cases, inevitable for the small business seeking sustained expansion it is also becoming an important strategy for big business which is increasingly recognising that franchising is an intelligent method of business operation.

Airlines and banks for example today use franchising for at least some parts of their operations. Governments too are increasingly embracing franchising  –  if traditional government services such as post, transport, prisons  can be privatised then franchising is a sensible strategy to facilitate service delivery.

Franchising is also being applied beyond its traditional commercial context.

The rapid development of social franchising – the use of the commercial franchising model to achieve social rather than for profit outcomes – has proven to be very effective as a tool for social entrepreneurship.

Any business operating through multiple outlets will exploit the power of its brand, its systems, its technology and its management expertise.

Franchising provides the ingredient lacking in a company owned and managed chain – the hands-on proprietorship of the franchisee. Innovative businesses will continue to apply the franchise model in innovative ways to exploit the unique synergies franchising offers.