A franchise is a business structure where the owner (the franchisor) licenses a third party (the franchisee) the right to operate a business or distribute goods and/or services using the franchisor’s business name and systems. This arrangement is for a specified period and involves a fee.

The franchise fee can be an upfront payment, an ongoing fee (such as a percentage of revenue or profit), or a combination of both. Franchising serves as an alternative to the franchisor building and managing a chain of stores independently.

In recent years, franchising has experienced rapid growth in Australia, particularly in the small business sector. Annual revenue from franchising exceeds $100 billion, with over 500,000 employees working within franchises.

The success of franchising is largely due to the mutual incentives it provides. Both franchisors and franchisees benefit from the success of the franchisee’s business, fostering a shared interest in its prosperity.

Why Consider Buying a Franchise?

There are numerous compelling reasons to buy a franchise. Here are some key advantages:

1. Incentives and Rewards: Owning and operating your own franchise allows you to directly benefit from your hard work, with monetary rewards closely tied to your efforts.
2. Established Brand: Starting with a franchise can be easier than building a business from scratch, as you leverage a well-established brand with a proven track record.
3. Legal Protections: In Australia, franchises are regulated by the Franchising Code of Conduct, overseen by the ACCC. This code provides significant legal protections, requiring franchisors to disclose critical information (e.g., financial details) to prospective franchisees and offering a seven-day cooling-off period after signing the initial franchise agreement.
4. Site Selection and Setup Support: Franchisors typically assist in identifying prime business locations and support the setup process, reducing the risk of operational failure and ensuring a smooth launch.
5. Flexible Terms: Franchise agreements can be flexible, ranging from short-term arrangements to indefinite terms, allowing you to choose a commitment that fits your plans.
6. Ongoing Support and Training: Franchisors generally offer continuous support, training, and insights, including lessons from past experiences. This support often covers specific business models as well as general business skills like marketing, merchandising, and accounting.
7. Cost-Effectiveness: Buying a franchise is often more affordable than starting an independent business from scratch, due to the established systems and support provided.
8. Bulk Purchasing Discounts: If your franchise sells goods, you typically benefit from lower purchase costs thanks to the franchisor’s access to bulk discounts, making your initial investment more economical.
9. Shared Advertising Benefits: As a franchisee, you indirectly benefit from advertising efforts made by other franchisees, increasing brand visibility and customer reach without additional cost to you.
10. Competitive Protection: Depending on your franchise agreement, you may enjoy protection from competition within the franchise network, ensuring a more secure business environment.

Buying a franchise offers a blend of independence and support, making it an attractive option for aspiring business owners.