FRANCHISING: AN INTRODUCTION
Franchising in Australia is amongst the most dynamic and progressive business sectors in the economy. It is a recognised and reputable way of doing business in Australia.
Franchise systems are present in most Industry sectors, and the economic impact of franchising is substantial and growing. It is hard to think of take-away food without thinking of a product produced using a franchised format; difficult to purchase petrol except through a franchised petrol station; and impossible to imagine a shopping centre without franchised stores. Franchising has revolutionised retailing in Australia, and provided small business proprietors with the competitive resources to compete against the large corporations that dominate Australian retailing.
Franchising in Australia may have initially provided a means for Australians to benefit from foreign products and systems, but it now is the chosen format for many Australian entrepreneurs to expand and develop their business. The great majority of franchise systems operating in Australia are home grown, and increasing numbers of Australian franchise systems are successfully taking their systems overseas.
Franchising in Australia commenced in a significant way in the early 1970’s under the influence of the franchised US fast food systems – KFC, Pizza Hut, McDonalds – which commenced operations here at the time. The growth of franchising since that time has been remarkable. Over the last two decades franchising in Australia in its contemporary “business format” mode has developed into a highly significant and dynamic business activity which has expanded to include virtually every product and service business. As in North America the tremendous growth and popularity of business format franchising has transformed franchising from a specialised marketing technique into a highly competitive, innovative vehicle for expansion of retail product and service industries.
FRANCHISING YOUR BUSINESS
Franchising is an exciting marketing method. Properly structured and well run it provides benefits and satisfaction for both parties. However, it is not an easy ‘route to riches’ for franchisor or franchisee, nor is it a panacea for the ills of a ‘sick’ business.
Establishing a franchise has to be undertaken with skill, patience and capital.
The time scale for establishing a franchise system and preparing it for marketing can be as long as three years and it can take another three to five years before the franchisor begins to see net profits and cash flow.
The capital requirements of the franchisor have to reflect these time spans. However, once the network moves into net profit and achieves relative maturity, the return should make the effort and investment worthwhile.
FRANCHISING CODE OF CONDUCT
The franchise sector has been regulated by the ACCC since 1998. A cornerstone of the regulation is the Franchising Code of Conduct. The ‘Code’ has been created to assist the ongoing relationship between the franchisee and franchisor. Issues covered include:
✔ Disclosure of the pertinent information regarding the Franchisor,
✔ Conditions contained within the Franchise Agreement, and
✔ Complaint handling and dispute resolution procedures.
The Code was originally introduced in 1998, amended on several occasions, and replaced by a comprehensive new Code with that came into effect from 1 January 2015.
✔ View the ACCC Franchising Code of Conduct resources (external site)