About Franchisng : What is Franchising?

 

Franchising is the most successful form of small business operating in the world today. It has been shown to be at least two and a half times more successful than independent small business, and enjoys an overall success rate of approximately 85% over 5 years (compared to the independent small business failure rate of the same amount).

Franchising has grown rapidly in Australia for two main reasons – our geographic spread and our entrepreneurial nature.

Most Australians dream of owning their own home and being their own boss. Franchising can make this a reality. Because our population is spread throughout this vast continent, franchising can give motivated local owner-operators an opportunity to tap into a “big business” brand and operations to produce a very effective combination.


Franchising has provided tens of thousands of Australians and their families the opportunity to own their own businesses and to be in business “for themselves, but not by themselves”. With the support of a franchisor and an established method of operating, franchisees can achieve higher returns and capital gains more quickly than similar independent businesses, plus enjoy the ongoing support of the franchisor and the camaraderie of their fellow franchisees.

Regulation

Australia was the first country in the world to introduce national franchising regulation, which commenced on July 1, 1998.

This regulation is designed to prevent exploitation in the franchise relationship, and establishes minim requirements on franchisors when dealing with prospective franchisees.

One of these requirements is that all franchisors must make disclosure information available to purchasing and renewing franchisees in accordance with the format laid down by the Franchising Code of Conduct (the national franchise regulations).

Disclosure must be provided at least 14 days before a franchise agreement can be signed, and is intended to provide relevant information to help the franchisee make a reasonably informed decision about their purchase. It also provides time for a franchisee to make sure they get legal, accounting and/or financial advice about their decision to purchase a franchise.

The Code also stipulates a 7-day cooling-off period after signing a franchise agreement The Code is administered by the Australian Competition and Consumer Commission (ACCC), and must be followed by franchisors at all times.

Franchise Council of Australia

The Franchise Council of Australia is the peak body for franchising in Australia and represents the interests of franchisors, franchisees and service providers to the sector. It conducts educational seminars from time to time and has a couple of publications which may be of interest to prospective franchisees (see www.franchise.org.au for details).

Further Reading

How NOT to buy a franchise (Article reproduced from Franchising Magazine)
The Franchisee's Guide to the Franchising Code of Conduct – A Small Business Overview