What is franchising?

What is franchising?

Franchising is the practice of using another business’s successful business model. By replicating a successful model, the new business owner or franchisee has a greater level of incentive than an employee, they directly benefit from the effort they put into their business.

The Main Advantages of Franchising:

  • The franchisee has the advantage of starting up quickly, capitalising on a proven brand and its associated tools, software, business relationships and procedures as opposed to developing them on their own.
  • You are ultimately your own boss and responsible for growing your business to suit your needs and income expectations, essentially, you get back what you put into it.
  • The franchisor will train you to run your franchise the same way their other successful franchise locations are run, to ensure that you are running your business efficiently. This will also help to eliminate any common mistakes a new business owner usually makes.
  • When you buy a franchise and start building and running your business, you can always call on experienced people like the franchisor or even to other franchisees when you hit a rough spot or want to share new ideas for growing the business.
  • The most important reason to consider a franchise when buying a business is that you are buying a system. Since there is an already established system in place, there is a higher likelihood of success if you follow it. These systems are designed to improve the overall productivity and increase leads for each franchise.
  • The image and brand awareness is already recognized when you buy a franchise. The customers are usually more comfortable dealing with a familiar with and working with brand, that they already know and trust.
  • There is usually no need to worry about advertising your franchise, because the franchisor usually takes care of handling all of the marketing.

Franchising is also a system where interdependence is required to ensure success. The success of the division and the franchisor is based on the success of the franchisees so there is a common motivation and goal.

In Australia the Federal Government manages the Franchising Code of Conduct which is a mandatory industry code of conduct that has the force of law under the Competition and Consumer Act 2010.

The code aims to regulate the conduct of participants in franchising towards each other and to ensure they are sufficiently informed about a franchise before entering into it. The code is also a cost effective dispute resolution scheme for parties involved in franchising.

The Australian Competition and Consumer commission promotes compliance with the code and educates parties about their rights and obligations. The ACCC has useful information including guidelines, articles and fact sheets. They will also investigate complaints and undertake enforcement where necessary.

Find out more about the franchising industry by checking out the Franchise Council of Australia’s website.

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