What is Franchising?

  • An innovative method of distributing goods and services.
  • A legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group wishing to use that identification in a business.
  • An extremely successful and rapidly growing way of doing business in Australia.

Types of Franchises

  • Retailer - Retailer... the franchisor markets a service or product under a common name and standardised system, through a network of franchisees, e.g. Forty Winks.
  • Manufacturer - Retailer... e.g. a parent company grants the right to a franchisee to sell their products, e.g. new car dealerships.
  • Manufacturer - Wholesaler... the franchisee is granted rights under license to distribute the franchisors product, e.g. Coca-Cola
  • Wholesaler - Retailer... e.g. frequently a cooperative of franchise retailers who have formed a wholesale company through which they are contractually obliged to purchase e.g. hardware and automotive product stores.

Four Elements of a Franchise

  • Brand - the name associated with the services delivered in a memorable and satisfying experience to the customer
  • Operating System - institutionalises the excellent service delivered in a memorable experience so it can be done over and over again from franchise to franchise in a consistent manner
  • Support System - helps the franchisee get better and better at delivering the service in a memorable experience which ultimately improves a franchisees financial performance
  • Franchisee - brings talent and experience to the business and is motivated by being in a good system

The Advantages of Franchising

For the franchisor

  • Allows the business to expand much more quickly than they could otherwise
  • The business can invest less capital and labour as the franchisee supplies both
  • The business can ensure it has competent and highly motivated owners/managers at each outlet through franchising
  • Businesses are able to provide franchising rights to only qualified people
  • Studies show that franchised businesses perform better than company owned stores

For the franchisee

  • Franchisees face much less risk through purchasing a franchise, than tom starting a business from scratch
  • Much less risk through purchasing a franchise, than from starting a business from scratch.
  • Franchisees are affiliated with a proven company or system which generally have national or state based name / brand recognition.
  • Franchisees are provided with proven and efficient method of operation and support including management, business development, marketing and training assistance, etc.
  • They will benefit from professional state and national marketing campaigns.
  • They will benefit from the buying power received by being part of a group.
  • Access to more customers through brand awareness.
  • Easier to obtain finance.
  • And the customer - knowing what you're getting...the quality of the product or service at one location will be comparable to other locations.