What is franchising?
In Australia, here’s how we define a franchise:
“…one person (the franchisor) grants another person (the franchisee) the right to carry on a business in Australia supplying goods or services under a specific system or marketing plan substantially determined, controlled or suggested by the franchisor or its associate.” – ACCC
Most of us are familiar with the concept of a franchise and probably frequent them all the time: F45 (a huge success story with a current value of $400mil+), Snitz, Roll’d, Baker’s Delight… the list goes on. Traditionally you’ll see a lot of health, fitness and hospitality brands become franchises as they’re industries that lend themselves well to it.
Franchising can be a really attractive options for a lot of reasons. It means you can grow faster, have fewer employees, ideally reduce your day-to-day involvement and limit your risks and liabilities to name a few.
If you have the intention to franchise your business, you need to have it early on. Building the processes and structure differs to those of a business that won’t be franchised. For instance, your internal processes need to be crafted and recorded in a way that means they can be easily duplicated and sold. All the legalities surrounding franchising need to be considered early one.
Franchising is a balancing act. What do you get, and what do your franchisees get? It needs to be profitable and attractive to everyone involved.
What are some considerations you need to make before jumping into a franchise?
- How long will the franchise license last? It needs to be attractive enough for people to want in, whilst balancing what will be most profitable for you.
- Are you going to charge franchisees for training? What training would be involved?
- Franchisors will often include in contracts that franchisees must only buy from one supplier, and then have a vested interested in that supplier (they may have a stake in it or own the whole thing). This can a great way of leveraging the business even further.
- Are you supplying cars and/or equipment? Do they need to use a certain quality or brand?
- Who pays for the marketing? You might want franchisees to go through the same agency, or be happy with providing guidelines that they need to follow themselves.
- How often do they need to report to you and what does that involve? You might want face-to-face meetings, certain KPI’s or financial reporting.
We also spoke to Matt about the legalities around franchising and what you need to be aware of in that space:
- The contract is everything so make sure you’ve had help from a great lawyer you engage a lawyer experienced with franchise agreements and the knowledge of the franchising legislation.
- Having your IP and trademarks covered protected is always important, but especially when it comes to franchising. The last thing you want is to create a model that can easily be replicated. doesn’t give franchisees surety that what they are buying into is safe from others reproducing.
If you have an existing business you’d like to franchise or are thinking of starting one, it’s crucial to chat to your advisor before making any decisions. As always, the right advice will help you navigate avoidable mistakes and set you up for success from the get go.
