Franchising Success

• Franchising success.pdf

Franchising success.pdf

If you haven’t noticed franchising is big business in Australia, and it’s only going to get bigger. As job security becomes a thing of the past, and with small business failure rate at around 90% in the first five years, many people are opting for a “turn key” business that offers them a proven, profitable platform to launch their business career.

The variety is enormous, from mobile dog washing to Harvey Norman, from $5,000 to $1 million, there isn’t much that hasn’t been franchised in Australia. A recent franchise survey conducted by profession Lorelle Fraser in 2004 found:

• franchise systems have increased 41% to 8
• franchised units have increased 14% to plus 50,00
• franchise employees have increased 30% to plus 600,000

Sergio Alderuccio says that the interest in franchising is increasing at a rate of knots. “Australia has the highest number of franchises per head of population in the world, and the industry as a whole turns over more than $85 billion to the local economy,” Sergio says.

On figures that we have, over 80% of franchisees are successful so the chances of making it as a successful franchise far outstrip your chances if you choose to go it alone,” he adds.

Sergio attributes the following reason as to why franchising is so successful:

• A proven business formula
• Group strength in purchasing and lease negotiations
• Ready made systems help franchisees to start faster and avoid costly mistakes
• Brand power to influence customers and suppliers
• Cost efficiencies by centralising core activities such as marketing, accounting and reporting

“It’s important to match your choice of franchise to your skills and interest,” says Sergio. “If you can’t see yourself doing the work and enjoying it, then walk away.”

Rod, a veteran of franchising for some 30 years and director of DC Strategy says that good franchisees are now in high demand from franchisors. “Substantial competition exists between the 850 franchise systems, but also from the 20% of existing franchisors who are interested in selling their franchises,” he says.

Rod Young has identified what he believes are the top 10 elements potential franchisees should look for in a franchisor:

1. Honesty and integrity
2. A concentration on compliance
3. Strong brand presence
4. Traffic building advertising
5. Good management information systems
6. Comparative analysis
7. Above average profit
8. Opportunities for multiple franchise ownership
9. Strong training system for staff
10. Regular conferences

“The ‘churn rate’ of franchisees is relatively low with the average franchisee staying with a franchise network for around seven years,” Rod adds. “Successful franchisees should consistently earn in the range of $150,000 to $250,000 and above.”

Do your research

If you are looking to become a business owner and break into the world of franchising a good place to begin is the Franchise Council of Australia. The FCA is the industry body and the website contains a lot of very useful information about franchising, the industry, and what to look out for. The site also contains a franchise directory listing of over 400 Australian-based franchise systems.

How much?

Prices vary dramatically depending on what you want to do, what industry it is, the type of franchise, and the level of return you are looking for. The costs to get into a franchise can vary from as little as $5,000 to as much as $1 million, and more. Rod Young always advises to set your budget upfront.

Advice

Before you purchase a franchise, you must get professional advice from both a lawyer and accountant, familiar with franchising. Once again, the FCA can point you in the right direction.

Franchising code of conduct

There is a franchising code of conduct which, in additional to common law, increases protection for franchisees from dodgy operators. Ensure that the franchise you are dealing with is a member of the FCA. Call the FCA on 1300 669 030 and find out if the franchise you are speaking to is a member or not.

Franchising success special feature

Over the next 10 pages, you will learn about some emerging franchise systems in Australia, and the people behind them. Some, like Handi Ghandi are just starting out, while others, such as Kwik Kopy have been part of the Australian landscape for some time, and are looking to reinvent themselves. So if you are on the lookout to join a successful franchise system with lots of upside, you may find one of these to your liking. Who knows, one of them could become the next McDonalds!

DCS Consulting - business growth specialists.