Franchising is a method of marketing goods and services and has almost no limits in terms of business categories it can apply to.Franchising is a very popular and successful business format.
The franchising sector in Australia and New Zealand has over three times the number of systems per capita than the United States. Typically buying a Franchise involves the payment of an initial franchise fee and ongoing royalties, and in exchange the Franchisee receives a license from a franchisor to conduct business under a brand name for a specified period of time.
Franchising has proven that it can offer a high-level of standardized quality, brand image, favourable reputation and convenience that many people today find important for guiding their consumer decision processes when selecting products and services. The trend in the consolidation of franchise systems and strong growth in franchise units combined with the greater acceptance of franchising practices, indicate that the Australian and New Zealand franchising sector is maturing.There is now high acceptance of the Franchising Code of Conduct (of Australia) and lower levels of disputation and agreement terminations in the franchising sector.
Franchising offers business buyers the opportunity to purchase a ‘turn-key’ operation with the requisite support to run a successful business. The franchise model offers the franchisee the opportunity to take the name of a tried and tested business with an established reputation, and – despite having to adhere to the image, quality and standards of the franchisor – the potential for growth and earning power, within a personally owned franchise, is not restricted.
In fact, for those possessed of good business acumen but who want to side-step the hassle and risk of a start-up, franchising is the perfect route to owning your own enterprise. As a franchise owner, you will enjoy the challenges and rewards of running your own business, but with the experience, expertise and full support of an established, market leading brand behind you.
In terms of cost when buying a franchise, the franchisee will pay their franchisor an initial fee at the outset along with on-going management service charges – usually based on a percentage of annual turnover. In return for this investment, the franchisor is obligated to provide ongoing support in the forms of training, development and marketing. A successful franchise investor will take full advantage of what is offered in the package and use those tools to turn a healthy profit for themselves and, by proxy, contribute to the success of the whole operation.
Rather than expecting subservience, most franchisors welcome the entrepreneurial spirit. After all, a franchisee coming up with brilliant new marketing strategies and ideas for product development is far better for the business as a whole than a non team player. Most franchise parent companies encourage suggestions, because it’s where they get many of their best ideas.
McDonald’s corporate, for example, didn’t come up with the inspiration to start selling breakfast. The concept of the Egg McMuffin was developed by a franchisee.
Try and think of buying a franchise as purchasing a hefty leg-up on the steep incline to business success, as well as a reassuring safety net.
The Franchisors goal is to sell many Greenfield or Start up Franchises thus expanding their Network.
As a Business Broker I prefer to sell firmly established Franchises which are working under a proven Business Model. They are more likely to have a history of “Maintainable Earnings” and strong Support from the Franchisor.