Franchise Business - 10 Reasons in a Franchise
Content
F
ranchising is on a roll.
The sector that brings
household names such as
McDonald’s, Pizza Hut and
Subway to our shopping hubs,
also delivers opportunities for
new ventures; think of any service
or retail item, and there will be
a franchise system to match.
^
1. It’s a booming sector
According to the Asia-Pacific Centre for
Franchising Excellence, the number of
franchises operating in Australia has
increased 15 percent in the last two years and
stands at about 1180 businesses.
Facts to consider:
✱✱More than 400,000 people are directly
employed in franchising
✱✱There are 65,000 franchisee-owned units
and 8,000 company units
✱✱Almost one third of Australian franchisors
operate overseas
✱✱More than 90 percent of franchise systems
in Australia have been developed in the
home market
✱✱Taking into account the car dealerships,
the franchise sector is valued at $131 billion
2. Business ownership with
minimised risk
Investing in a franchise gives an individual
the chance to build a business with
minimised risk. Of course there is never any
guarantee of success, either with a franchise
or an independent business, but the presence
of tried and tested systems, a brand, and
experience in trading creates something
of a shortcut in establishing a business for
franchisees.
Steve Rollings opened his first Anytime
Fitness franchise in Muswellbrook in early
2008, and has gone on to open a total of 10
gyms in just five years.
“I decided to purchase a franchise because
I wanted to operate a business system, not
create one. It’s much faster to do business this
way,” he says.
Luke Baylis, SumoSalad co-founder, says “It
is very difficult for a start-up to create that
same degree of competitive differentiation
within a short period of time. We’ve made
a lot of mistakes along the way and we’ve
learned from those mistakes – we’ve built a
very strong, robust business system.
“People can learn from our mistakes as
opposed to going out there and making
costly mistakes themselves.”
The rigours of establishing a business from
scratch are considerable and in a franchise
there is a wealth of experience to draw on
that can ease the process.
A franchisee starts out with training in the
job, an operations manual and hands-on
experience; there may also be advice on
which equipment to buy, guidance on staff
employment, help on choosing the right
location, rent negotiations.
When a franchisee opens the door to their
business, they are already ahead.
3. The power of the brand
What a franchise network offers the
new franchisee is the chance to start off
with knowledge and experience at their
fingertips. Who wouldn’t want to know
which marketing tools are most effective in
reaching customers, and how best to get a
message across to the community?
What could be better than starting out in
business with a brand that customers already
recognise and love?
Why wouldn’t a business owner want to
have effective marketing collateral at their
fingertips without having to do all the
research and commissioning themselves?
For many franchisees the presence of a
marketing team that feeds through valuable
material and advice is a massive bonus in
the business, relieving them of the time and
effort of achieving similar standards on their
own – and most often without the marketing
skills.
Lee Bennett, who with his wife Sheree runs
two Quest Serviced Apartment franchises,
says a strong brand helped them establish
their second business after they relocated to
a new area.
“The best thing about it is people know it and
when we’re selling it to our customers, it’s not
a hard sell, people respect it and it’s such a
strong brand, that’s why we love it.”
4. A competitive advantage
Once the business is up and running,
a franchisee can then turn to the depth
of experience on hand in the network to
gain competitive advantage. It is difficult
for any individual business owner, even
in
established
business
networking
organisations, to get access to the amount of
information that a good franchise system can
supply its franchisees on an ongoing basis.
Already the franchisee has the advantage of
a brand; then there is the hands-on support
and training supplied, and ongoing business
development,
marketing,
franchisor
experience – and perhaps most valuable,
fellow franchisees.
The beauty of a franchise network is the
capacity for any individual to draw on the
experiences of others in the same position.
Some franchise systems offer formal forums
for franchisee discussions, some have a
network that is engaged through an intranet,
others rely on mentoring or informal
friendships to help steer franchisees through
challenging times.
The franchisor doesn’t have the answer to
everything – getting practical advice, and a
reality check, from others in the frontline is
invaluable for a franchisee.
5. Focus on building your
business
Every business goes through a rollercoaster
of success and challenges; what is gained by
being part of a franchise system that is harder
to achieve as an individual is an ongoing
focus on the progress of the business from
professionals.
Everyone who commits time, money and
effort into running a business does so with
financial goals in mind. While the level of
capital and profit involved varies according
to the individual system and each franchisee,
there is a common aim of achieving an
income that allows the franchisee to live the
lifestyle they choose.
Although a franchisee’s business is their own
responsibility, most franchisors are engaged
in helping franchisees achieve their own
goals, and through business development or
field managers are able to offer advice where
needed about ways to improve sales, cut
costs and increase profit.
The more advanced franchise systems
will use data sourced from the franchisees
themselves to benchmark and inform the
network about success, and will encourage
sharing of best practice between franchisees.
Kate Groom is the co-founder of
SmartFranchise
and
the
Franchise
Accountants Network. Comparing your
business performance with that of others can
help you identify areas to improve,” she says.
“For instance, do others have higher sales
with fewer staff? You can then learn what
they do which leads to this result, and apply
the lessons on your business. A franchise
provides a ready-made set of comparison
businesses, and this is regarded as one of the
advantages of being in a franchise network.”
6. Access to finance
Getting a loan from a bank is harder than
it used to be; financial institutions have
tightened their lending criteria, and although
the ‘open for business’ approach exists, it
can still be tough to get the finance to open a
business.
Banks have an accreditation system which
means franchisees can get a higher percentage
of the franchise investment loaned to them, on
the basis of the franchisor’s model – up to 70
percent. While this can be very beneficial for
franchisees investing in the well-established
brands, the reality is that accreditation plays a
minimal role in financing franchisees.
But the existence of a tried and tested business,
good operating systems, a visible brand and
franchisor experience, can still be appealing
to any lender.
Bankers are risk averse.
Independent business owners have to add to
their other roles the task of staying abreast of
the ever-increasing technological advances
that will benefit their business. Not so for a
franchisee.
Innovation, research and investment in
technology are all vital elements to a business
that a good franchisor will undertake, with
the end goal the boosting of a franchisee’s
business through greater efficiencies, swifter
responses,
improved
communications,
up-to-date data analysis, and a competitive
edge.
Leanne Pilkington is general manager of the
New South Wales group of Laing+Simmons
franchises.
“As part of our strategic growth strategy,
we have invested significant resources in
developing the best systems and tools to
enable our existing and new franchisees
to do what they do best and focus on their
businesses,” she says.
“By working together with our franchisees
to understand exactly where they require
greater support and tailoring our service
offering accordingly, we’ve ensured our
investment will hit the mark.
“The evolution of our franchise offering has
effectively re-energised our franchisees and
the results they are already achieving on the
back of these initiatives are encouraging,”
she adds.
A banker’s understanding of what the
business is about is developed over years
through a relationship with the franchisor
and that can’t be replicated by a start-up.
As franchisees build successful mini-empires
their power within the franchise network
increases too, giving them greater capacity
to influence strategy for the whole business.
Subway’s national franchisee of the year
2014, Kane Richards, operates two stores in
Sydney and, in partnership with a master
franchisee, owns another Subway outlet.
One of his roles is to serve on the board of an
independent Subway franchisee owned and
operated purchasing company.
“Being a board member has given me the
opportunity to be involved with strategic
buying, managing the supply chain and
delivering business solutions to assist
Subway franchisees,” he says.
The Franchising Code of Conduct sets out
rules for the content of key documents in
the franchise buying stage – the disclosure
document and the franchise agreement –
and requires franchisors to provide these
documents at least 14 days before they hand
over non-refundable money or are signatories
to an agreement.
The bigger franchise systems will have
someone appointed to these negotiating roles
and they build up strong relationships with
business partners and suppliers over time. A
franchisee gets the benefit of this.
It is hard for any business today to make
progress without attention to technology,
whether that’s for business data capture and
analysis, operating tools, communication
methods, or social media.
“We now employ more than 200 people
so we are very much in the people game.
Once you have three units your system has
to completely change. My role now is very
much as a CEO of an organisation,” she says.
10. Rules and regulations
What advantage does a chain of stores or
a national service operator have over an
independent? Buying power. And that’s
something shared by a franchise system.
Anyone considering a franchise investment
should ask the questions, why not benefit from
the franchisor’s negotiations on ingredient,
products or equipment? Why not reap the
financial reward of having a franchisor
negotiate a retail lease on their behalf?
8. Access to innovation
Carolyn McManus is an award-winning
franchisee with multiple outlets in The
Coffee Club network and a Ribs n’ Rumps
franchise.
Beyond the legal constraints that inform
any business behaviour, for franchisees
there is a regulatory code that governs the
franchise sector, and fundamental to this
is the relationship between franchisor and
franchisee.
7. Access to buying power
Some franchisors operating across the
country in the business services field can also
supply their franchisees with local clients as
part of a national deal with an organisation’s
head office.
And while franchisees can leverage the brand
benefits and reputation of their original outlet
as they expand, they can also benefit from
franchisor advice. Franchisors can assess
if the business is ready and prepared for
further growth, they can help the franchisee
understand how best to manage the extra
sites, and provide guidance as the business
moves into a new sphere.
9. Opportunity to expand
Just one business outlet might not be enough
for the truly ambitious. A franchise network
can be the landscape in which to set out on
the journey to multi-unit ownership; while
some franchisors are reluctant for franchisees
to step back from their business in order to
focus on developing multiple units many
franchise systems see the value in successful
franchisees expanding their reach and
building the brand at the same time.
Successive governments have tweaked the
code, with the aim of achieving the requisite
balance between franchisor and franchisee;
there are proposed reforms set to take effect
in January 2015.
The Franchising Code of Conduct is
administered by the Australian Competition
and Consumer Commission and the ACCC
can investigate alleged breaches of the code
and take action if necessary.
The ACCC has also teamed up with
Griffith University’s Asia-Pacific Centre for
Franchising Excellence, and has funded a
free, online, five module course on pre-entry
franchisee education. F
ranchising is on a roll.
The sector that brings
household names such as
McDonald’s, Pizza Hut and
Subway to our shopping hubs,
also delivers opportunities for
new ventures; think of any service
or retail item, and there will be
a franchise system to match.
^
1. It’s a booming sector
According to the Asia-Pacific Centre for
Franchising Excellence, the number of
franchises operating in Australia has
increased 15 percent in the last two years and
stands at about 1180 businesses.
Facts to consider:
✱✱More than 400,000 people are directly
employed in franchising
✱✱There are 65,000 franchisee-owned units
and 8,000 company units
✱✱Almost one third of Australian franchisors
operate overseas
✱✱More than 90 percent of franchise systems
in Australia have been developed in the
home market
✱✱Taking into account the car dealerships,
the franchise sector is valued at $131 billion
2. Business ownership with
minimised risk
Investing in a franchise gives an individual
the chance to build a business with
minimised risk. Of course there is never any
guarantee of success, either with a franchise
or an independent business, but the presence
of tried and tested systems, a brand, and
experience in trading creates something
of a shortcut in establishing a business for
franchisees.
Steve Rollings opened his first Anytime
Fitness franchise in Muswellbrook in early
2008, and has gone on to open a total of 10
gyms in just five years.
“I decided to purchase a franchise because
I wanted to operate a business system, not
create one. It’s much faster to do business this
way,” he says.
Luke Baylis, SumoSalad co-founder, says “It
is very difficult for a start-up to create that
same degree of competitive differentiation
within a short period of time. We’ve made
a lot of mistakes along the way and we’ve
learned from those mistakes – we’ve built a
very strong, robust business system.
“People can learn from our mistakes as
opposed to going out there and making
costly mistakes themselves.”
The rigours of establishing a business from
scratch are considerable and in a franchise
there is a wealth of experience to draw on
that can ease the process.
A franchisee starts out with training in the
job, an operations manual and hands-on
experience; there may also be advice on
which equipment to buy, guidance on staff
employment, help on choosing the right
location, rent negotiations.
When a franchisee opens the door to their
business, they are already ahead.
3. The power of the brand
What a franchise network offers the
new franchisee is the chance to start off
with knowledge and experience at their
fingertips. Who wouldn’t want to know
which marketing tools are most effective in
reaching customers, and how best to get a
message across to the community?
What could be better than starting out in
business with a brand that customers already
recognise and love?
Why wouldn’t a business owner want to
have effective marketing collateral at their
fingertips without having to do all the
research and commissioning themselves?
For many franchisees the presence of a
marketing team that feeds through valuable
material and advice is a massive bonus in
the business, relieving them of the time and
effort of achieving similar standards on their
own – and most often without the marketing
skills.
Lee Bennett, who with his wife Sheree runs
two Quest Serviced Apartment franchises,
says a strong brand helped them establish
their second business after they relocated to
a new area.
“The best thing about it is people know it and
when we’re selling it to our customers, it’s not
a hard sell, people respect it and it’s such a
strong brand, that’s why we love it.”
4. A competitive advantage
Once the business is up and running,
a franchisee can then turn to the depth
of experience on hand in the network to
gain competitive advantage. It is difficult
for any individual business owner, even
in
established
business
networking
organisations, to get access to the amount of
information that a good franchise system can
supply its franchisees on an ongoing basis.
Already the franchisee has the advantage of
a brand; then there is the hands-on support
and training supplied, and ongoing business
development,
marketing,
franchisor
experience – and perhaps most valuable,
fellow franchisees.
The beauty of a franchise network is the
capacity for any individual to draw on the
experiences of others in the same position.
Some franchise systems offer formal forums
for franchisee discussions, some have a
network that is engaged through an intranet,
others rely on mentoring or informal
friendships to help steer franchisees through
challenging times.
The franchisor doesn’t have the answer to
everything – getting practical advice, and a
reality check, from others in the frontline is
invaluable for a franchisee.
5. Focus on building your
business
Every business goes through a rollercoaster
of success and challenges; what is gained by
being part of a franchise system that is harder
to achieve as an individual is an ongoing
focus on the progress of the business from
professionals.
Everyone who commits time, money and
effort into running a business does so with
financial goals in mind. While the level of
capital and profit involved varies according
to the individual system and each franchisee,
there is a common aim of achieving an
income that allows the franchisee to live the
lifestyle they choose.
Although a franchisee’s business is their own
responsibility, most franchisors are engaged
in helping franchisees achieve their own
goals, and through business development or
field managers are able to offer advice where
needed about ways to improve sales, cut
costs and increase profit.
The more advanced franchise systems
will use data sourced from the franchisees
themselves to benchmark and inform the
network about success, and will encourage
sharing of best practice between franchisees.
Kate Groom is the co-founder of
SmartFranchise
and
the
Franchise
Accountants Network. Comparing your
business performance with that of others can
help you identify areas to improve,” she says.
“For instance, do others have higher sales
with fewer staff? You can then learn what
they do which leads to this result, and apply
the lessons on your business. A franchise
provides a ready-made set of comparison
businesses, and this is regarded as one of the
advantages of being in a franchise network.”
6. Access to finance
Getting a loan from a bank is harder than
it used to be; financial institutions have
tightened their lending criteria, and although
the ‘open for business’ approach exists, it
can still be tough to get the finance to open a
business.
Banks have an accreditation system which
means franchisees can get a higher percentage
of the franchise investment loaned to them, on
the basis of the franchisor’s model – up to 70
percent. While this can be very beneficial for
franchisees investing in the well-established
brands, the reality is that accreditation plays a
minimal role in financing franchisees.
But the existence of a tried and tested business,
good operating systems, a visible brand and
franchisor experience, can still be appealing
to any lender.
Bankers are risk averse.
Independent business owners have to add to
their other roles the task of staying abreast of
the ever-increasing technological advances
that will benefit their business. Not so for a
franchisee.
Innovation, research and investment in
technology are all vital elements to a business
that a good franchisor will undertake, with
the end goal the boosting of a franchisee’s
business through greater efficiencies, swifter
responses,
improved
communications,
up-to-date data analysis, and a competitive
edge.
Leanne Pilkington is general manager of the
New South Wales group of Laing+Simmons
franchises.
“As part of our strategic growth strategy,
we have invested significant resources in
developing the best systems and tools to
enable our existing and new franchisees
to do what they do best and focus on their
businesses,” she says.
“By working together with our franchisees
to understand exactly where they require
greater support and tailoring our service
offering accordingly, we’ve ensured our
investment will hit the mark.
“The evolution of our franchise offering has
effectively re-energised our franchisees and
the results they are already achieving on the
back of these initiatives are encouraging,”
she adds.
A banker’s understanding of what the
business is about is developed over years
through a relationship with the franchisor
and that can’t be replicated by a start-up.
As franchisees build successful mini-empires
their power within the franchise network
increases too, giving them greater capacity
to influence strategy for the whole business.
Subway’s national franchisee of the year
2014, Kane Richards, operates two stores in
Sydney and, in partnership with a master
franchisee, owns another Subway outlet.
One of his roles is to serve on the board of an
independent Subway franchisee owned and
operated purchasing company.
“Being a board member has given me the
opportunity to be involved with strategic
buying, managing the supply chain and
delivering business solutions to assist
Subway franchisees,” he says.
The Franchising Code of Conduct sets out
rules for the content of key documents in
the franchise buying stage – the disclosure
document and the franchise agreement –
and requires franchisors to provide these
documents at least 14 days before they hand
over non-refundable money or are signatories
to an agreement.
The bigger franchise systems will have
someone appointed to these negotiating roles
and they build up strong relationships with
business partners and suppliers over time. A
franchisee gets the benefit of this.
It is hard for any business today to make
progress without attention to technology,
whether that’s for business data capture and
analysis, operating tools, communication
methods, or social media.
“We now employ more than 200 people
so we are very much in the people game.
Once you have three units your system has
to completely change. My role now is very
much as a CEO of an organisation,” she says.
10. Rules and regulations
What advantage does a chain of stores or
a national service operator have over an
independent? Buying power. And that’s
something shared by a franchise system.
Anyone considering a franchise investment
should ask the questions, why not benefit from
the franchisor’s negotiations on ingredient,
products or equipment? Why not reap the
financial reward of having a franchisor
negotiate a retail lease on their behalf?
8. Access to innovation
Carolyn McManus is an award-winning
franchisee with multiple outlets in The
Coffee Club network and a Ribs n’ Rumps
franchise.
Beyond the legal constraints that inform
any business behaviour, for franchisees
there is a regulatory code that governs the
franchise sector, and fundamental to this
is the relationship between franchisor and
franchisee.
7. Access to buying power
Some franchisors operating across the
country in the business services field can also
supply their franchisees with local clients as
part of a national deal with an organisation’s
head office.
And while franchisees can leverage the brand
benefits and reputation of their original outlet
as they expand, they can also benefit from
franchisor advice. Franchisors can assess
if the business is ready and prepared for
further growth, they can help the franchisee
understand how best to manage the extra
sites, and provide guidance as the business
moves into a new sphere.
9. Opportunity to expand
Just one business outlet might not be enough
for the truly ambitious. A franchise network
can be the landscape in which to set out on
the journey to multi-unit ownership; while
some franchisors are reluctant for franchisees
to step back from their business in order to
focus on developing multiple units many
franchise systems see the value in successful
franchisees expanding their reach and
building the brand at the same time.
Successive governments have tweaked the
code, with the aim of achieving the requisite
balance between franchisor and franchisee;
there are proposed reforms set to take effect
in January 2015.
The Franchising Code of Conduct is
administered by the Australian Competition
and Consumer Commission and the ACCC
can investigate alleged breaches of the code
and take action if necessary.
The ACCC has also teamed up with
Griffith University’s Asia-Pacific Centre for
Franchising Excellence, and has funded a
free, online, five module course on pre-entry
franchisee education. F
