Taking on a franchise is an innovative way to get into business. You have the support of a larger entity and all the benefits that come along with an established brand. At the same time, you have the agency to create a successful, profitable business on your own terms. Here in Australia, there are over 1100 franchisors and 65,000 franchise units.
Regardless of the popularity or support, becoming a franchisee is a big step; navigating the bureaucracy, paperwork, rules, regulations, and requirements that come with a franchise is a skill — but is entirely learnable. In this article, we outline the key things you need to consider when opening your own franchise.
Consider Your Competition
One of the first things you will have to do is analyse the competition. To do this, the experts recommend a few key steps:
-
Evaluate the Location
Make sure there aren’t too many similar businesses nearby. Look at the success of nearby businesses with similarities and their industry reputation.
-
Examine Customer Demand
When customer demand drops, a saturated market can make growth difficult for new businesses. To determine if a franchise is facing low demand, examine future trends; if the market shows growth and profitability, it’s a positive sign. Assess how the franchise meets customer needs and whether it equips you to succeed from the start, ensuring a strong investment.
-
Check Customer Loyalty
Before investing in a franchise, check social media and reviews to gauge what kind of customers frequent the area. If loyalty is lacking or feedback is mediocre, it may indicate a crowded market, which isn’t always a dealbreaker, but can challenge new businesses.
Learn About Your Franchisor
Doing your due diligence is critical in order to learn about the kind of business you are entering into. There are a few ways to go about this, but the Australian Competition and Consumer Commission outlines some good questions to ask former or current franchisees. When you are talking to another franchisee, consider asking them how they became a franchisee for the brand, what sort of background in business they have, and what they would do differently next time.
Aside from asking others in the franchise system for advice, you should research the franchisor, look at their history, see how much they support franchisees, how they have dealt with hard economic times, and how they drive growth. For smaller brands, this may be harder but not impossible — look at how their structures operate and compare them to other, larger brands to judge if they might be on the right track.
Work With the Franchisor
This sounds obvious. and is really non-negotiable, but establishing a good relationship with your franchisor is important. As a franchisee, there are a few key things that the experts recommend to develop your relationship with the franchisor. The first and most intuitive is to show interest and knowledge in the business; if you demonstrate a real understanding and passion for the ins and outs of your franchise and the business as a whole, you will instantly impress.
At the end of the day, franchises are successful because they follow a system or a set of rules. These rules go beyond each McDonald’s branch having the same menu, and they vary greatly depending on the business, so appreciating and understanding how the systems in your franchise came about will show the franchisor you are invested. If you have suggestions or ideas for change, bring them up with your colleagues. After all, innovation drives growth.
If your franchisor controls elements of the business, like your stock, establishing a good working relationship is crucial to ensure you’re getting the best deal for the business and the best product for your customers. For example, if you sell tech products, research mobile phone accessories wholesale in Australia to weigh up your options and secure the best deal.
Understand the Legal Aspects
Remember, no one is expecting you to have a degree in law — although it wouldn’t hurt. However, you need to understand the basics of franchise law in Australia to safeguard your investment. The Franchise Disclosure Document (FDD) is crucial, as it details the franchisor’s financial status, obligations, fees, and potential risks. Review this document carefully, as it outlines what you’re getting into and will help you to make an informed decision as to whether or not a franchise is for you.
The franchise agreement is another key document binding you legally to the franchisor. It covers critical aspects such as territorial rights, fees, and the terms for renewal or termination. Missing important details could lead to complications, like restrictive clauses that limit your operations.
Consulting with a franchise lawyer is highly recommended. They can help you interpret the FDD and franchise agreement, negotiate better terms, and protect your rights.
Try your best to read and be mindful of Australian laws like the Franchising Code of Conduct, which governs franchise relationships, and other local regulations that may affect your business. Understanding these legal aspects upfront will help you avoid disputes and set a solid foundation for your franchise.
Plan for the Long Term
A great plan for a franchise is one that lasts. If you’ve done the hard work at the beginning and set up a business that works, you can reap the rewards for years to come. If things don’t go as smoothly as planned, that’s okay. Like anything, it will be a learning curve, and your ability to adapt is crucial.
Consider the long-term potential of your franchise from the start. Assess whether the brand has room for growth and if the franchisor supports expansion, such as opening additional locations or diversifying offerings. Having a clear vision for the future will guide your decisions and help you stay focused on sustainable growth.
It’s also wise to think about your exit strategy early on. Whether you plan to sell the franchise eventually or pass it on to the family, knowing your options will help you make informed decisions as you build the business.
Like any business, it’s important to keep up with market trends and be ready to adapt to the times as they change. This kind of flexibility will help your franchise thrive for as long as possible.
Opening your own franchise can be an incredibly exciting business venture that could lead you to great success, but there are things you need to remember when beginning your new business venture. Remember to keep your competition and customers in mind, work with your franchiser, educate yourself as much as you can, and plan for your future. Good luck!