Good way to do business
2 Nov 2006

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From humble beginnings, the franchise sector has developed into an $80 billion industry, providing jobs for more than 600,000 people.

Nearly 1000 different franchise operations are in Australia at 64,000 workplaces. The sector accounts for as much as 10 per cent of the Gross Domestic Product in Australia.

And the figure is growing weekly as people see the franchise model as a good way to do business.

But creating a franchise, or buying a franchise, should not be done lightly.

Though there are some great franchise operations, it is important to do your homework.

Market leaders such as Gloria Jeans and Bakers Delight continue to show the way.

Franchise Council of Australia chief executive officer Richard Evans says good franchises offer many advantages, such as shared business knowledge, information, strategies, resources and branding. But he says it is still daunting and challenging for any small-business owner.

Business consultant Rod Young, from DC Strategy, says with high employment in Australia, would-be franchisees can afford to be fussy. He says in 1998, according to research undertaken at Griffith University, there were 693 franchisors. Today, that figure is well over 900.

Young says there is “substantial competition” for franchise owner/operators among more than 900 franchise systems.

But with many baby boomers looking to get out of their franchise businesses, there could be as many as 20 per cent of existing franchisees interested in selling their businesses.

It is imperative that franchisors have good systems in place, but Young says individual store performance is also significantly influenced by the calibre of the owner/operator.

“Some of the best and most valuable businesses in franchised networks have been destroyed by incompetent franchises who have been poorly selected,” Young says.

“In addition, many franchisors have been influenced by franchisees wishing to exit the system.

“Conversely, many very good franchise owners are purchasing run-down or struggling franchises and turning them into extremely profitable ventures.”

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