When American salesman Ray Kroc mortgaged his home and invested his life savings to go on the road selling milkshake makers, little did he know his encounter with two restauranteurs would see the creation of one of the world’s most successful franchise concepts.
Mr Kroc took a simple business idea to sell Multimixer milkshake makers and forged a multi-million company which today has one of the most recognisable symbols anywhere in the world, the “Golden Arches”.
It was the mid-fifties when Mr Kroc and the McDonald brothers met and decided to open a chain of hamburger restaurants known as McDonalds, across the United States. Almost 50 years later the McDonalds mascot, Ronald McDonald, is second only to Father Christmas in terms of worldwide recognition.
Franchising has since become a billion-dollar industry. Recent years have seen the rapid expansion of franchising with reports that franchising sales generate an annual turnover of $81 billion in Australia alone. In fact, it is almost impossible to drive down any main street in Australia today without passing a franchised business.
Currently, it is estimated that the Australian franchise sector accounts for nearly four per cent of existing business numbers, and a massive 30 per cent of retail sales volume. Naturally, with such a differing array of opportunities to choose from, finding the right franchise can be a daunting task for those people seeking to become a franchisee.
The Buying a Franchise guide takes prospective franchisees through the processes involved in buying a franchise including how to find the right franchise, what to look out for, how to evaluate the franchise success and the associated legal aspects. It has been compiled with the assistance of franchise expert, Sydney-based lawyer and Franchise Ratings Australia founder and managing director, Robert Gardini.
The guide contains the latest information including new regulations and changes to the Franchsing Code of Conduct.
When deciding to buy a franchise the following two broad understandings should be investigated:
- You should have an understanding of the advantages and disadvantages of franchising.
- You should have an understanding of the franchise you want, and how to evaluate it.
The following is a brief list of questions potential franchisees should ask when assessing a franchise:
- Are the franchisor and the current franchisees profitable?
- Is the franchise well organised?
- Does it have regional or national adaptability?
- Does it enjoy a growing public acceptance?
- What is its point of difference or unique selling proposition?
- How good are the financial controls of the business?
- Is the franchise credible?
- What kind of exposure has the franchise managed to attain, and how has the public reacted?
- Are the cash requirements reasonable?
- Does the franchisor have integrity? Are they committed to your success?
- Does the franchisor have a monitoring system?
A study conducted by Edith Cowan University in Western Australia shows that franchisees are 2.5 times less likely to fail than independent small businesses.
