As a business owner, the prospect of franchising may have crossed your mind. Whilst franchising can be a highly effective way of growing your business, navigating this can be challenging. Australia stands out as a global leader in franchised businesses. This thriving industry, valued at over $180 billion, has played a pivotal role in shaping Australia’s economic prosperity over the past two decades. As reported by the Franchise Council of Australia, there are currently more than 1,200 franchised businesses actively operating in the country. This article delves into how franchising can become a catalyst for expansion and the ways you can grow your business through it.
Why Franchise?
If you are a business owner looking for an avenue for rapid growth, franchising may be a way for you to achieve that goal.
Franchising your business means that you can ‘lease out’ your successful business and operations model, trademark or symbol. This is achieved through a franchise agreement. This allows individuals or companies to purchase the right to run the business under your brand for a specific period.
Under this model, franchisees will receive the benefit of your business and brand. They are also able to generate profits and cash for the period of the franchise agreement. As the franchisor, you receive a percentage of the profits generated by the franchisee’s business. You are able to do so while growing your goodwill and brand presence in the market.
In the Business for Yourself, but Not by Yourself
While franchisees can run their business themselves, they are ultimately partnering with you. As the franchisor, you will allow them to utilise your established business model, brand and support systems. You are also able to establish strict guidelines which enable you to be in ultimate control of your brand.
While franchising may not be the right business model for everyone, it can enable you to expand your business faster than independently. Going down the franchising path means you must be comfortable giving up some control over the customer experience. However, franchising offers significant benefits, helping you overcome obstacles to organic business growth.
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To ensure the success of a franchise model, it is crucial to collaborate with franchisees who are self-motivated and self-disciplined. These individuals not only enjoy the fruits of their hard work but will also actively contribute to the overall growth of your brand and franchise network. The model incentivises self-motivated franchisees. This is achieved by reducing the need for extensive micromanagement by franchisors and allowing more focus on strategic, long-term growth.
Expanding your business through a franchise model enables you to enhance the overall business without needing to focus on everyday management tasks. Additionally, it empowers franchisees to invest capital in the business, eliminating the necessity for a significant portion of their capital to be tied up in individual stores.
Moreover, as franchisees take ownership of their businesses, they assume responsibility for liabilities. Therefore, the growth of your business is only constrained by the willingness of prospective franchisees to sign up for your franchise business.
How Does Franchising Work?
Franchising is a business model in which a franchisor makes the critical elements of a business available to others for a fee. This can include trademarks, symbols and the operations framework.
The ultimate guide to setting up a franchise.
Franchises are, and in most cases, very prescriptive. An example is McDonald’s. The majority of McDonald’s stores that you visit are franchises – individual businesses operated by the franchisees under the franchisor’s network. Even with these independent stores, they share the same look and feel. The menu and pricing are typically the same, no matter where you are in the country.
This is because the franchisor has outlined, in concrete terms, how the franchisee must run the business. The franchisee receives the right to use the McDonald’s brand, recipes, and business systems in exchange for paying a range of fees or levies to the franchisor. The growing number of franchises in Australia shows that franchising agreements can be a win-win for both parties.
Key Takeaways
If your business is successful and in high demand, and you are exploring ways to expand your brand, franchising may be worth considering. Franchising offers a path for rapid business growth by leasing out your successful model and brand through a franchise agreement. Franchisees benefit from your brand, generating profits during the agreement period, with you, as the franchisor, receiving a percentage. While franchisees run their business, they partner with you, utilising your model and support. Although franchising requires relinquishing some control, it accelerates growth and overcomes obstacles. Collaborating with self-motivated franchisees is crucial for success, reducing the need for micromanagement and allowing focus on strategic growth. This model enables a broader business focus, empowering franchisees to invest capital. The only growth limit is the willingness of prospective franchisees to join your network.
If you need help growing your business through franchising, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers who can answer your questions and draft and review your documents. Call us today at 1300 544 755 or visit our membership page.
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