We originally wrote this feature article for MYOB. You can view the original publication here
Whether you’re considering buying into a franchise business or scaling your existing concept into a franchising model, there are several key things you should be aware of before committing to anything.
When you decide to start your own business, there are several paths you can take. You can start your own business independently, you can buy an existing business, or you can start up a franchise business.
All options are dependant on your individual circumstances, personality, experience levels and how you want to achieve work/life balance.
So what makes buying a franchise business appealing to so many people? Let’s take a closer look at this unique way of doing business to see if it may work for you.
What is a franchise?
A franchise is often defined as a way of doing business.
The franchisee pays a set or ongoing fee to the franchisor, and the franchisor provides a business blueprint and ongoing support to the franchisee. The franchisee gets an established brand, a set of guidelines for business success, and ongoing support and product information.
It’s a system designed to take away a bit of the burden of starting your own business, and, because it comes with a proven operating system, it can reduce the risk of failure. It still requires hard work and dedication to succeed, but you have someone there to call on and help.
As the Franchise Council of Australia says, the franchising system provides small business (the franchisee) with big business (provided by the franchisor) tools.
Why buy a franchise?
For some, it’s a no-brainer, for others it’s a case of ‘why would you’?
Being a successful franchisee depends on the individual needs, capabilities or desires of the person looking to start their own business. But for those who do start a franchise, they generally do so because of the support you get in return. It’s running your own small business – but instead of having to figure out everything as you go, you get handed a blueprint of operations and training on how to execute the business model. Being given all the information you need appeals to people who might not have any business experience, as it supports them along the way.
When buying into a franchise, you also buy into an established brand and its reputation. These factors generally contribute to a higher success rate for new franchise businesses, as they already have a recipe for success and a well-known name, which can make consumers feel more comfortable when using their services.
Money also plays a part in why people choose to start a franchise. While there are ongoing fees to consider in a franchise, these businesses are often cheaper to start up than stand-alone ventures, and they come with extensive and proven budgets and costings.
Turning a business into a franchise
It’s not just new businesses that can become franchises. A number of our current franchisees started as stand-alone businesses, then joined the franchise system.
Established businesses often have an existing network of contacts and clients, but they may not be able to invest in growth, or they may struggle to keep up-to-date with compliance or new technology, joining a franchise can often solve these problems with an inbuilt support and training system.
Another factor in established businesses becoming franchises is marketing – you could be the best bookkeeper or gardener out there, but if you can’t get your goods or services out on the broader market, then your business won’t succeed.
Franchises have comprehensive marketing strategies and generally the money to spend on lead generation, something that is not as accessible as a small start-up or independent business. Small business ownership can also be quite isolating, working on your own with no backup or support networks can lead to stress and anxiety, which is why turning your business into a franchise and gaining a community network and support is so appealing to existing business owners. A franchise allows you to work for yourself – not by yourself.
Things to consider when buying a franchise
If you’re interested in buying a franchise business, it’s essential to do your research.
Always make sure you are aware of the fees, your requirements and your rights and responsibilities. Ask a lot of questions. Franchise businesses should be as transparent as possible, so no query should seem too ridiculous or too small to be answered by the franchise company. Make sure you talk to several existing franchisees and find out their experiences. Also, speak to the support staff and ask all those ‘what if’ questions you might have.
It’s also vital you understand what you are committing to when you start up a franchise. You will be required to work within an established franchise structure, so you should be comfortable with and understand your requirements.
Don’t limit your questions and enquiries to the franchise either. Consider seeking legal and accounting advice from professionals that have experience with franchises.
The more information and support you have when you start, the more likely you are to succeed as a business owner.