Franchising is a dynamic and changing industry. There are opportunities for new franchise systems in a variety of growth industries. Existing franchise systems cannot be complacent and must work to develop and reposition themselves in the market to meet consumer demand and stay ahead of their competitors.
Establishing a franchise system takes incredible commitment, resources and money.
What’s not hot
1. Rolling out a franchise system without proper planning and development.
2. Offering franchise systems without a detailed operating manual.
3. Offering a franchise opportunity without complete transparancy and disclosure.
There is a tendency for new franchisors to try to get into the market too quickly before they are ready and compliant. This is usually driven by enquiries from prospective franchisees and a desire to lock them in before they walk away and/or take up another opportunity.
Knowing what to do and implementing the things that need to be done to establish a franchise system, are two different things.
Getting the foundations in place will ensure a successful rollout of the system, limit exposure to risk to the Franchisor, and ensure longevity of the system. Seeking the right specialist advice will be the foundation of establishing a successful franchise model. A specialist franchise lawyer and franchise consultant will be able to lay the foundation to ensure compliance and establishment of your operating systems which will minimise legal and commercial risk.
Franchising is a regulated industry and many other industries have their own independent regulation and requirements, for example building companies, real estate franchises, financial services and rental companies all have an overlay of their own regulation. Getting the financial model right in advance for both franchisor and his franchisees is critical.
As a lawyer who advises many franchisees, I start from the basic premise that if the franchise opportunity does not work financially for the franchisee, they should walk away.
All of the other benefits of the system are meaningless, whether it is the branding, marketing, lifestyle opportunity,… if financially it does not work and the franchisee cannot draw a reasonable salary for their effort and obtain a return on their investment. So where do you find the specialist consultants?
The Franchise Council of Australia, which is the peak body representing the franchise sector in Australia, represents franchisees, franchisors and service providers and they are an excellent resource and point of contact.
What is hot in franchising in 2017
There are a number of industries that are experiencing growth in the franchise sector. Sue Campbell from the consulting firm ‘Franchise Right’, highlights the following sectors as areas to look out for:
• Aged Care – Based on our aging population over 65, which will substantially increase, this sector will provide long term business growth and sustainability;
• Health Services – Particularly in areas such as physiotherapy, podiatry, skin and dermatology. This sector also includes cosmetic and body services, which is following the European trend including weight loss, cosmetic injectables, and other body treatments;
• Pet Services & Personal Homecare Services – This includes veterinary, grooming, daycare, boarding, and other pet services based on the increasing pet ownership in Australia;
• Food & Retail – Smart new operators continue to bring innovation in food concepts by also controlling the supply chain.
Establishing a franchise system is one thing, however getting it out into the market and commercialising it is different challenge. Social media is now a must. Catherine Kimpton, director of ‘Beyond Business Sales’, who acts for a number of successful franchisor systems, states that engaging a business broker who has a wide and varied client base, and comprehensive portfolio businesses, can add real value to promotion of a franchise system including identifying potential sites and prequalification of potential franchisees. Catherine’s firm has been appointed to act for ‘Tommy Guns’, which is a unique and new concept in male grooming and barber shop. They offer a unique turnkey experience and currently have 12 stores across Australia with more locations rolling out.
Catherine also sees growth in the areas of childcare and early learning centres, which will continue to experience growth over the next few years.
There are exciting times ahead and it appears another year of exceptional activity in the Franchising sector. The best advice is to get the right advice – to do it once and do it right.
Robert Toth is a Partner of Marsh & Maher Lawyers, with over 30 years of experience in franchise law.
He is an Accredited Business Law Specialist with expertise in franchising, licensing and distribution and franchise dispute resolution (acting for both international franchisors and franchisees).
03 9604 9400