Franchising - An Enormous Opportunity?

With our malls, newspapers and the internet full of franchise systems there is no denying the rise of franchising.  So what is involved with franchising and is it for you?

What is it?

• Franchise systems are usually designed to sell either services or products using popular branding. 
• The relationship between a franchisor and a franchisee is governed by a franchise agreement under which the franchisor grants the franchisee the right to use the franchisor’s system and brands so that the franchisee can sell products and/or services.
• A franchisee will usually be strictly controlled by the franchisor to ensure that it does not adversely affect the integrity of the franchise brand.

What’s in it for a franchisor?

• If the franchisor strikes it right with proper documentation and a favourable environment, franchising can allow for rapid business growth without any real outlay by the franchisor.  This is because the franchisee operates its own business as an independent operator and is responsible for the set-up costs and other aspects of the business such as the employment of staff and any lease of premises.
• It is vital that the franchisor takes the time to select the right franchisee as the wrong franchisee can do irreparable damage to a franchise.

What’s in it for a franchisee?

• So long as the franchisee has done its homework, it should be buying into a proven business system with an established brand and reputation.
• Through training and support from the franchisor a franchisee should get the benefit of the franchisor’s business skills and knowledge as well as any improvements that the franchisor develops along the way.

Getting it right

• If a franchise fails it is all too often due to poor planning, inappropriate documentation, inadequate brand and systems protection or bad legal or accounting advice.
• A well considered franchise agreement underpins any successful franchise.  A franchise agreement should strike a fair balance between the franchisor and franchisee and clearly define the relationship between the parties and protect the franchisor’s brand.  A good agreement can make or break a franchise and anyone considering franchising should ensure that they get the best possible advice.