Australia’s franchise landscape
Franchising is a rapidly growing aspect of Australia’s small business sector. According to the Franchise Council of Australia’s latest “Franchising Australia” survey, there are 1,120 business format franchisors in Australia with an estimated 79,000 individual franchisees in operation employing over 470,000 people.
For a small investor looking at starting a business, franchising can offer many benefits. This is particularly the case if the franchise brand is a successful one, there are genuine opportunities for growth and healthy capital gains will be experienced after a few years of operation.
Franchisor marketing support
If you do some research, you will find that the most successful franchises are those where the franchisor takes responsibility for undertaking any required marketing activities. In other words, the franchisor promotes the business directly to consumers and end-users to increase brand awareness, drive consumer traffic and also generate leads for the individual franchisees. In addition, the franchisor will equip the franchisees with any required sales tools including point of sale (POS), brochures and promotional items.
The franchisee, on the other hand, ensures the product or service is delivered according to the franchise rules. Typically, food franchises work like this. However, many other market sectors use the same formula, for example Harvey Norman and the Bank of Queensland.
So why is this detail so important?
Like any new small business, new franchisees probably lack the funds and the skills required to promote their business. One of the great benefits of franchising stems from the ability of the franchisor to harness economies of scale in relation to marketing costs, especially in relation to large scale campaigns, printing and digital marketing activities.
So, if you want to buy a franchise, particularly if it’s your first business venture, stay away from those franchises that expect you to take responsibility for the marketing. It would be more beneficial to start your own independent business and save the royalties and marketing levies you’d otherwise be paying to a franchisor.