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Why should I franchise my business?

Sunday, 29 August 2010 | By Oliver Milman

The idea of having little control over part of your business may not appeal to many budding entrepreneurs, but franchising your company could prove lucrative in the right circumstances.

Firstly, you will need to let go of the idea that a franchisee will be your employee or their business will be entirely your responsibility. Becoming a franchisor demands that you take a step back.

 

“You’ve not only got to want business success for yourself, but also others,” explains Steve Wright, executive director of the Franchise Council of Australia. “You’ve got to have support in place, such as training, product sourcing and business support.”

 

“You also have to have an understanding of franchise management and make sure your franchisees comply with the law. If they don’t, it’ll damage your brand.”

 

So what are the advantages of franchising your business? Well, the burden of growing your business will be shouldered by a franchisee, you won’t have to run their operation day-to-day as you would if you expanded your business normally and there are fewer staff to oversee.

 

Plus, if done correctly, it can prove highly secure and profitable.

 

Normally, you’d want to set up and establish your business before deciding to franchise it. Franchising works well when a stable and proven concept is rolled out elsewhere to be operated by someone else. If your business is flourishing and you feel there are similar opportunities in other locations, franchising could be for you.

 

Although equipment, premises and training will all have to be provided by you, this doesn’t necessarily mean that franchising will cost you more than a standard business expansion.

 

A franchise fee will cover much of your outlay and, aside from initial capital costs, a fairly decent economy of scale can be achieved. Just make sure that you have a proven business behind you – most businesses don’t become franchised until at least three years into their lifespan.

 

Franchising is extremely popular in Australia. According to the Franchise Council of Australia, the sector grew by nearly 10% in 2009, with 1,200 franchisors and 70,000 franchisees across Australia. Per capita, these totals are higher than any other country in the world.