1. Number of Franchise Systems
   There are a total of 747 franchise systems in Australia, as follows: 
   Business format franchise systems - 708 
   Motor vehicle franchise systems - 33 
   Major auto fuel retail franchise systems – 6 
   
2. Penetration of Franchising 
   Australia is the most franchised nation per head of population in the world. That is, there are more franchise systems in Australia compared to our population than any other country, and Australia has at least three times as many franchise systems per head of population than the United States.
   
3. Turnover
   Total turnover of all franchise systems in Australia in 1998/99 was $76.5 billion.
   
4. Number of Franchisees
   There are 49,400 franchised outlets in Australia.
   
5. Business Growth
   Franchising created 4,600 new businesses alone in 12 months from mid-1998 to mid-1999.
   
6. Employment
   A total of 651,900 people are employed in the franchise sector as follows:
   Business format franchise systems - 553,200.
   Motor vehicle franchise systems - 70,000
   Major auto fuel retail franchise systems - 28,700
   In the four years to 1999, franchising created 400,000 new jobs in Australia.
   
7. Age of Franchise Systems in Australia
   The average length of time that current franchise systems have been franchising is eight years.
   
8. Franchise Success
   Franchising enjoys a small business success rate more than two and a half times greater than stand-alone small business. Each year, only 1% of franchisees leave their businesses.
   
9. Australian International Expansion
   Currently 24% of Australian franchise systems operate overseas, with a further 27% of systems planning to commence foreign operations within the next three years.
   
10. Regulation
    Australia introduced the world's first national franchising regulations with the introduction of the Franchising Code of Conduct on July 1, 1998

Source: Franchise Council of Australia 

 

1. Assess their own reasons for wanting to own a business
2. Assess the lifestyle and income implications of owning and operating a business
3. Assess the franchise opportunities consistent with 1 and 2 above. 
4. Build your understanding of the franchise relationship by reading The Franchisee's Guide, published by the Franchise Council (RRP $16.50 incl GST). 
5. Narrow your franchise search to a few systems, then request further information. 
6. If appropriate and you are comfortable with the decision, select a system and commence the application process. 
7. Ensure you have adequate borrowing capacity, including working capital, to successfully establish this type of business. 
8. Be sure you receive and evaluate all disclosure material during the application process. 
9. Be sure you receive legal and accounting advice from lawyers and accountants with franchise experience before making any final commitment. 
10. Use the cooling-off period to check your facts and figures and determine if you still want to proceed.

If you found this useful, read more from the source website.

 

1. The franchisee's lack of basic or specialised knowledge is overcome by the training programme of the franchisor.
   
2. The franchisee has the incentive of owning their own business with the additional benefit of continuing assistance from the franchisor. 
   
   The franchisee is an independent businessperson operating within the framework of the franchise system. This provides the opportunity through hard work and effort to maximise the return from their business and the value of their investment. In all franchise networks there are three basic levels of performance, despite the fact that all franchisees are provided with the same raw material. 
   
   A. There are the high flyers who do extremely well, having the right attitude and approach, as well as some entrepreneurial skill which enables them to make the most of their opportunities.
   
   
   B. Then there are the average performers, who operate the system and basically achieve the anticipated performance levels. Their attitude and approach too is sound, but they lack the flair of the high flyers. They will earn a decent living in line with their expectations.
   
   C. Finally there are those whose performance levels are low. These are people who joined the franchise with the best of intentions, but they now lack the will or the aptitude, or have changed their mind and want to get out of the franchise. They clearly made a mistake in the first place by going into self-employment, and they perhaps deluded themselves into believing that their franchisor would remove all the risk for them.
   
3. In most cases, the franchisee's business benefits from operating under a name and reputation (brand image) which is already well established in the mind and eye of the public. Of course, there will be new franchise schemes which are in the process of being established and in which the name will not yet be so well known. This is a factor to recognise and to make allowance for. Picking up a sound, newer franchise in its early stages can be a good proposition but the risks are higher.
   
4. The franchisee will usually need less capital than they would if they were setting up a business independently because the franchisor, through their pilot operations, will have eliminated unnecessary expense.
   
5. The franchisor provides the franchisee with a range of services which are calculated to ensure, so far as is practicably possible, that the franchisee will enjoy the same or a greater degree of success as the franchisor has achieved. These services will include:

• The application of developed criteria for site selection and identification of trading location or, if the franchise is based upon a mobile operation, the area of such operation. 
• Guidance to the franchisee to assist in obtaining occupation rights to the trading location, complying with planning (zoning) laws, preparation of plans for layouts, shop-fitting and refurbishment, and general assistance in calculating the correct level and mix of stock and in the opening launch of the business. 
• The training of the franchisee and their staff in the operation of the business format and the provision of an operational manual with detailed instructions. 
• The training of the franchisee and staff in any methods of manufacture and preparation which may be appropriate. 
• The training of the franchisee in methods of accounting, business controls, marketing promotion and merchandising. 
• The purchase of equipment. 
• Guidance in obtaining finance for the establishment of the franchisee's business. 
• Getting the newly franchised business ready for trading and opened.

6. The franchisee receives the benefit, on a national scale (if appropriate), of the franchisors' advertising and promotional activities. It is usual for the franchisee to make contribution to the funds which are expended for this purpose.
   
7. The franchisee receives the benefit of the bulk purchasing power and negotiating capacity which are available to the franchisor by reason of the existence and size of the franchised network.
   
8. The franchisee has at his/her disposal the specialised and highly-skilled knowledge and experience of the franchisor's head office organization while remaining self-employed in their business.
   
9. The franchisee's business risk is greatly reduced. However, no franchisee should be under any misapprehension that they are not going to be exposed to business risk because they are under the umbrella of a franchisor. All business undertakings involve risk and a franchised business is no exception. To be successful, the franchisee will still have to work hard, perhaps harder than they ever have done before. The franchisor will never be able to promise great rewards for little effort. The blueprint for carrying on business successfully and profitably can rarely be a blueprint for carrying on a business without working.
   
10. The franchisee has the services of the field operational staff of the franchisor who are there to assist with any problems which may arise from time to time in the course of business.
    
11. The franchisee has the benefit of the use of the franchisor's patents, trade marks, copyrights, trade secrets, and any secret processes of formulae.
    
12. The franchisee has the benefit of the franchisor's continuous research and development programmes, which are designed to improve the business and keep it up-to-date and competitive.
    
13. The franchisor assembles the maximum amount of market information and experience which is available to be shared by all franchisees in their system. This gives the franchisee information which would not otherwise be available to them because of its cost or inaccessibility. Indeed, all franchisees contribute to this common fund of knowledge and experience which is available to the whole of the network.
    
14. There are sometimes territorial guarantees in appropriate cases which protect a franchisee from competition from the franchisor and other franchisees of the franchise within a defined area around the franchisee's business address and in the case of a mobile franchise, a defined area of operation.
    
15. The recognition by the banks of the advantages of franchise financing have made lending sources and terms available to franchisees which are more attractive than those offered to a non-franchised new businesses.

1. Inevitably, the relationship between the franchisor and franchisee must involve the imposition of controls. These controls will regulate the quality of the service or products to be provided or sold by the franchisee to the consumer. It has been mentioned previously that the franchisee will own his own business. However, the business which they own is one which they are licensed to carry out in accordance with the terms of their contract. They must accept that in return for the advantages enjoyed by them, by virtue of their association with the franchisor and all the other franchisees, control of quality and standards is essential. 
   
   Each bad franchisee has an adverse effect, not only on his own business, but indirectly on the whole of the franchised chain and as such, all other franchisees. The franchisor, will, therefore, impose standards and demand that they are maintained so that the maximum benefit is derived by his franchisee (and indirectly the whole of the franchised chain) from the operation of the franchisee's business. This is not to say that the franchisee will not be able to make any contribution, or to impose their own personality on their business. Most franchisors do encourage their franchisees to make contributions to the development of the business of the franchised chain which their individual talent and qualities permit.
   
2. The franchisee will have to pay the franchisor for the services provided and for the use of the system, i.e. the initial franchise fee and continuing franchise fees. 
   
3. The prospective franchisee may find it difficult to assess the quality of the franchisor. This factor must be weighed very carefully by the potential franchisee for it can affect the franchisee in two ways. 
   
   A. Firstly, the franchisor's offer of a business-format package may not amount to what it appears to be on the surface. 
   B. Secondly, the franchisor may be unable to maintain the continuing services which the franchisee is likely to need in order to sustain their business. These aspects will be discussed in detail in a later chapter.
   
4. The franchise contract will contain some restrictions against the sale or transfer of the franchised business. This is clear inhibition of the franchisee's ability to deal with their own business but, as with most of the restrictions, there is a proper reason for it. This provision is in the contract because the franchisor will have already been most meticulous in their choice of the franchisee as the original holder of the franchise for this particular outlet. Why then should they be any less meticulous in their approval of a replacement? Naturally, they will want to be satisfied that any successor to the original franchisee is equally suitable for that purpose. 
   
   In practice, there is normally very little difficulty in the achievement of successful assignments of the franchised business. Some agreements provide for the payment of fees to the franchisor to cover the costs of dealing with applications and training the new, replacement franchisees.
   
5. The franchisee may find themselves becoming too dependent upon the franchisor and fail to produce the personal drive which the system provides. Some franchisees lose their perspective. They delude themselves into believing that the franchisor has a duty to be so concerned about their particular business as to ensure that it has a flow of customers, and to provide a day-to-day involvement which is inconsistent with franchising as a concept.
   
6. The franchisor's policies may affect the franchisee's profitability. For example, the franchisor may wish to see his franchisee build up to a higher turnover from which he gets his continuing franchise fee, while the franchisee may be more concerned with increasing his profitability, which does not always necessarily follow from increased turnover.
   
7. The franchisor may make mistakes in their policies. They may arrive at decisions relating to innovations in the business which turn out to be unsuccessful and detrimental to the franchisee. This is why franchisors are always urged to market test innovations thoroughly in their own company-owned outlets and to be able to demonstrate to franchisees the cost effectiveness of introducing new ideas.
   
8. The good name of the franchised business and its brand imaged may become less reputable for reasons beyond their own control.

Source: Franchise Council of Australia: www.franchise.org.au

 

• Ask what the pretax net profits of existing operations are and compare them against the earnings statement or pro forma that the franchisor has already supplied you. 
• Find out what is included in the training program, field assistance, store design, facility construction, site selection, and feasibility studies. 
• What other vital information do you need to know before you purchase your franchise? Read Franchisor Checklist to find out. 
• Will there be any additional working capital required after the initial fee and investment, and if so, how much? 
• How will the franchisor arrange for the supply of product to the business? Ask to see a current price sheet.
• Ask the franchisor to detail exactly what the territorial restrictions and protections are. 
• Find out how many franchises have been sold to investors in the state you will be operating in during the last 12 months, and how many have opened a franchised business in that time. 
• Ask if the company has any plans for further expansion in the state. Has it identified any locations it plans to develop? 
• If purchasing a current franchise, ask to see the operating books and records of the business for the past two years. 
• What type of support will the franchisor provide once your franchise has opened its doors? 
• Find out if any franchisees have been terminated. If some have, have the franchisor detail the reasons. Have any franchisees failed or gone bankrupt? 
• What kind of financing is available from the franchisor, if any? 
• Find out if there are any current lawsuits pending against the franchisor. Have them elaborate on any past judgments. 
• Find out how disputes between the franchisor and franchisees are settled. 

Will the franchisor assist in site selection? It will be of enormous help if it does.Whether it does or not, do your own demographic study so you are familiar with the profile of the audience within the market area. 

Don't be afraid to ask questions. And don't be afraid that you'll appear foolish because, frankly, very few people understand the franchise agreement or the UFOC in full. Primarily, you're trying to pinpoint any problems that may exist in a franchise. Don't just settle on any franchise. 

If you run across a franchisor that is reluctant to pass along a list of current franchisees, makes promises that you'll earn a fortune on a limited investment, insists on deposits for holding a franchise unit, tries to convince you to sign before someone else does, or is full of empty rhetoric when answering your questions, head for the door. These are franchisors that are probably trying to pull a fast one to get your money. 

 

1. Click here to read "To franchise or not", addressing the merits of franchising.
2. Click here to read "Finding the right franchise for you".
3. The Franchise Council of Australia: www.franchise.org.au 
4. Australian Franchise Opportunities Exchange: www.franchisedirectory.com.au