Business Franchise Australia


Preparing for a Franchise: A First-Timer’s Guide

For anyone with the entrepreneurial spirit and the desire to operate their own business, franchise opportunities are an excellent place to start. After all, an inexperienced business person can benefit from cutting their teeth, running a branch of an already-successful business. That’s because, for the most part, franchises come with well-developed business plans, built-in customer bases, and have the benefit of leaving much of the marketing heavy-lifting to the parent organisation.

None of that means, however, that running a successful franchise is easy with no prior experience. In fact, even the rosiest statistics on the matter indicate that franchises in Australia have at least a 20 per cent failure rate. On top of that, the news is littered with stories about major franchises running into trouble. That reality should give pause to any new entrepreneur looking to jump into a franchise with both feet.

Instead, they should take their time and prepare themselves for the task of operating a franchise before making any decisions. That will increase their odds of success when they go all-in. Here’s a step-by-step guide on how to do that.


Start with a Personality Assessment


The first thing that a potential franchisee must do before getting involved with a business is to take an honest look at themselves in a mirror. That’s because it takes a pretty specific personality type to succeed in running a franchise. They’re not at all like running an independent small business.


For one thing, a franchisee can have very little control over how they run their new business and have to be capable of taking orders from the parent company. Those that tend to have an independent streak or that insist on doing things their own way will invariably run into trouble. At the same time, those that thrive on executing existing plans or workflows to perfection tend to excel as franchisees.


Get Familiar with the Code


In Australia, the job of overseeing franchises from a regulatory perspective falls to the Australian Competition and Consumer Commission (ACCC). The details of how the ACCC monitors and enforces the regulations surrounding franchises are known as the Franchising Code of Conduct. It functions as a guidebook for new franchisees, letting them know how their new business relationship should work, as well as what their rights and responsibilities are regarding their new business. It’s the kind of thing that every potential franchise owner should be intimately familiar with before entering into a contract with a franchisor.


Train for the Role


Although every franchise opportunity is unique, and most franchisees receive business-specific training as a part of their onboarding process, most industry veterans will admit that more preparatory training is essential. To begin, potential franchisees should take advantage of online training courses aimed at new franchise owners. Also, it’s also a good idea to take general business courses, just as you would prepare to launch a business from scratch. Today, a surprising number of new franchisees will go as far as taking an online MBA course to become expert operators before taking the leap into franchise ownership – and most end up being very happy that they did.


Marshal Financial Resources


As with any other type of business, the most precarious time for a new franchise is its first year of operation. Although a franchise has (hopefully) the natural advantage of name recognition and a well-developed target market, it’s rare for a new location of any franchise to thrive immediately. Believe it or not, it can take anywhere from six months to over a year to make solid profits (no matter what the franchisor tells you). For that reason, it’s critical to have a sound financing plan in place to take care of expected expenses while the business gets up to speed.


Create a Cost/Benefit Analysis


Last but not least, it’s a good idea to create a cost/benefit analysis that covers every aspect of the particular franchise under consideration. Start by making a list of every advantage the franchise comes with. Things like brand strength, marketing support, and available training. Then, compare that to the negative aspects of the franchise. Consider the total cost of ownership, from franchise fees and marketing contributions to mandated purchases of supplies and products. Also, try to calculate how long it might take to achieve a solid return on investment. If the pros outweigh the cons, move forward. If not, consider a different franchise or a different small business opportunity.


There are no Guarantees


It’s important to recognise that succeeding with a franchise is hard work and that there are no guarantees. This is just as true for an experienced franchisee as it is for a first-timer. The things that often separate the winners and losers in the franchise market tend to happen long before the doors are open. In other words, the devil is in the details and the more thorough the preparations, the better the odds of success. So, to all entrepreneurs considering taking the franchise route into the world of business, take your time and think everything through – the results will be well worth it.