From coffee shop to real estate, franchised businesses are big in Australia. Majella Corrigan looks at the pros and cons of getting involved.
A franchise is basically a way of doing business that allows a franchisor to expand without eroding his or her own capital, while offering the franchisee the opportunity of owning their own business, with support and usually conditions about the way it is run.
Top three reasons for buying a
franchise
- Benefit from the knowledge and training a franchisor provides. Independent owner, but with support.
- Safety in the knowledge a franchisee has bought into an established name that is recognized and already has a consumer following.
- Normally franchisees need less start-up capital than they would if they set up a business independently, because the franchisor has eliminated unnecessary costs through its pilot operations.
Three reasons why you might
hesitate
- Although franchisees own their own businesses, they have to comply with standards set by the franchisor. It only takes one bad franchise to have an adverse effect on the entire chain.
- Franchisees have to pay an initial and/or ongoing fee to use the services and systems of the franchisor. (But this is more than offset by savings through bulk discounts and initial start-ups, advice and a proven business technique.)
- An inexperienced franchisee might find it difficult to assess the quality of a franchisor. The business format initially might not live up to expectations and the
franchisor might not follow through with supervision and assistance. The Franchise Council of Australia says it is crucial to deal with its members.
What the experts say
According to the Dymocks franchising website: “Franchising combines the experience and assistance of a large business operator with the personal attributes of a motivated business entrepreneur. Franchising offers a ready-made image and reputation and enables you to benefit from large-scale advertising no small business could afford.”
See the May 2003 Money Magazine for more on what you need to know if you think of joining the trend.
For more information
For the complete story see Money Magazine's May 2003 issue.
Included in this issue is:
- RESI case study
- Franchise statistics in Australia
Disclaimer
This fact sheet is produced as an information service only without assuming responsibility. It contains general information only and should not be relied on as a substitute for financial or other professional advice. The information is current at 14 May 2003. The reader is referred to the specific terms of use of the Money website.
Source: Money Magazine, May 2003
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