Franchising: A Snapshot For Success

Statistics show that a start-up franchise has a 95 per cent success rate over an independent business which has a success rate of only 5 per cent. Why? It could be because training and expert knowledge is available from someone who’s been there and experienced the highs and lows.

Franchising contributed 14 per cent to Australia’s GDP in 2005, one quarter of franchises have entered the international markets and numbers for domestic startups have increased each year from 700 in 2002, 850 in 2004 and 960 in 2005, a growth rate of 14.6 per cent. Further evidence of the popularity of franchises is the sales turnover figure that is estimated at $128 billion dollars in 2005 alone. Many other statistics support the franchise venture over an individual business as being more successful and viable for the investor. That is why more people are attracted to franchising.

It could be thought that purchasing a franchise is almost as easy as sifting through your local business pages and choosing an industry or company that appeals to you. There is a little more to it though. Once you have chosen a franchise you need to submit a proposal promoting yourself to the company. The very best franchisors are those that ultimately, decide who they recruit as a franchisee rather than simply sell. As such these companies have a series of interview stages you need to pass before you are selected or declined. The interviews may sound daunting but it is a great opportunity to scrutinise a business. You can withdraw your application at any time during the interview process if you feel the fit is unsuitable.

A good franchisor wants you to succeed, to grow their brand and increase their bottom line. Several weeks before your business is due to open, most franchisors will invite you to attend training sessions that cover all aspects of the business. Aside from an in-depth look at the franchise, its values and principles, best practice franchisee training goes through information on recruitment, product, suppliers, customer service, financial reporting, time management and IT.

You should also expect franchisors to offer follow up training and mentorship. The franchisor will guide you through your first few months in the new business and will be available to answer any questions or concerns you may have.

Purchasing a franchise has many advantages:

1. The franchisee owns and operates their own business with the additional benefit of continual assistance from the franchisor.
2. You operate under the name and reputation (brand image) of the franchisor, which is already well established in the mind and eye of the public and best case, has global experience and exposure.
3. The support and benefits provided by a franchise system reduces a franchisee’s business risks.
4. The franchisee has access to the franchisor’s continuous research and development programs which are designed to keep it competitive up-to-date and improve the business.
5. The franchisee provides advice or help in determining and securing a suitable location.

There are several start up costs associated with franchises, you will need to speak to individual franchisors to find out costs but the main variables you will be paying for are: the franchise (use of names and any logos), shop fit out / cars / vans / equipment, training, marketing and advertising and an allowance for working capital. There may also be some continual charges, such as a percentage of your profits, which will most likely be used for marketing purposes. Another advantage of buying a franchise is that the marketing is done for you.

We recommend you do your own due diligence and thorough research into any business venture you are considering before signing on the dotted line. It is integral you seek professional advice from either a solicitor, banker, accountant or possibly a franchise consultant. The statistics speak for themselves but you need the necessary training and knowledge to make a franchise work.

Above all, don’t buy into a franchise system because it is in an industry that appeals to you, buy into one because it is successful.

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