Australia has more than 1,000 franchise brands per capita, making it one of the most franchised countries in the world. There are franchises in every business category, with varying degrees of complexity and price point.
There are many options and factors to consider when you are considering buying a new franchise business in Australia.
When evaluating a franchise, there are 6 features that you should look out for:
Stable industry
You need to invest in a stable industry. What type of business will be relatively profitable no matter what the economic climate is?
It is better to select a product or service people will pay for, regardless of the economic climate. This is because they may be time-poor or unable to produce the product themselves or the product is a necessity.
Market Competition
Consider franchises with lower competition, especially in the area you’re looking at. It is best to select a franchise in which the main competitors are independent stores or pop-up shops. The franchise business is more likely to take advantage of the market due to its size, brand recognition and popularity.
Market Position
Teaming up with a franchisee who is a market leader will increase your chances of success. When there are two or more franchises offering the same service or product, the investment versus the potential return will be higher for the leader.
The Franchise Brand Value
Brand recognition is one of the main reasons to invest in franchises. A brand that has been around for a while is likely to be a better investment than one that is less well-known and is still trying to establish itself in the minds of potential customers.
A Solid Business Model
A strong market leader must have a business model that is proven and works for both the Franchisee and the Franchise. To buy into a business franchise, you need support for the marketing and operational aspects. These must work for both parties to achieve the competitive edge needed for success.
Growth Opportunities
This can be a bit more difficult to define, but it’s the potential to grow with the franchise. Growth opportunities can be seen in a franchise that is growing and has expansion plans or activities underway.
Here are Some Further Tips to Help You Choose a Franchise
Franchise Model
This includes all the elements that make this franchise different from others. This model is based on the product and service that the franchise is marketing. You will need to have contingency and strategic plans in place when the franchise may change because of technology, competition, or government regulations. You should review all disclosure materials before and during your application.
Franchise Systems
Unique for each franchise business, these systems provide the framework that the business model operates. This includes not only the Franchisor’s and Franchisee’s rules, but also all the systems, procedures and management tools for the operation.
It also includes key areas such as marketing and promotion for the group, as well as the initial and continuing training at all levels. It is the main interface between the Franchisors and Franchisees.
You need to have a clear understanding from the start of the level of input each party has, their areas of responsibility, financial and physical commitments, and the performance indicators for each component.
Ask a lot of questions to get a full understanding of the situation, especially about upfront costs, ongoing charges, regional protections, success rates, and exit clauses. Consult a commercial lawyer if anything in the Franchise agreement needs clarification.
Before making a final decision on purchasing a franchise business, you should seek legal and accounting advice. This is best done by lawyers and accountants who have experience in franchising. You can use the cooling-off time to verify your facts and figures to determine whether you want to continue or not.
