How to turn your small business into a franchise in Australia
Australia today is arguably one of the major players in the world of franchising with estimates that there are more franchise systems per capita than any other country. A Franchising Australia 2016 Survey reveals that 79,000 business-format franchised units operate in the country, with 91 per cent of the brands being homegrown. The annual sales revenue for the country’s franchise sector is $146 billion, up from $144 billion in the previous survey done in 2014 (check out the top 10 Australian Franchises).
Franchising offers excellent opportunities for businesses and organisations to expand their operations to new markets with little costs and risk exposure. Despite a tumultuous 2020, franchising proved the most resilient segment of the small to medium business sector during the impact of the COVID-19 pandemic which creates a strong platform for moving forward.
If you are looking at how to franchise your small business in Australia, this guide will help you.
How Will I Know If My Business Is Franchisable?
If you are running a successful small business and want to consider franchising, it is crucial to determine first whether your business is franchisable. Australia typically boasts of some of the most stringent franchising legislation on the planet, and doing in-depth research on your business can be the difference between success and failure.
In general, your business will be considered franchisable if it meets the following criteria:
Profitability
Franchising is never an experimentation ground for new business ideas. You first need to be running a profitable business before entertaining even the thought of franchising. A franchisable business should be generating an adequate profit margin that allows you and your future franchisees to make money.
Transferable
The core principles of your business should be transferable to your franchisees – meaning your systems, procedures, expertise, skills, and know-how can be transferred to others. Business transferability should also include assets, employees, licenses, and ongoing contracts.
Teachability
Apart from being transferable, your systems should also be teachable – i.e. easy to learn and operate and subsequently teach. Ideal franchise systems and procedures should allow teams to be trained in them within a maximum of three months.
Credibility
Having a solid reputation as a trusted entrepreneur with a long history of success can help you gain the credibility currency you need for a successful franchise mission. Notably, you should ensure your concepts can be proved with a good track record and an expert management team.
Unique Selling Point
You should also ensure your business has a unique selling point that helps you stay one step ahead of your competitors. Australian national and local marketplace is crowded, therefore you need to offer top-notch products and services for your brand to compete successfully.
Ongoing Support
It is also crucial to provide ongoing support to your franchisees. Ideally, you must demonstrate an ability to allocate adequate resources and specialists that offer help to your franchisees beyond the initial training you provide. Ongoing support should cover crucial areas in the operating system, financial management, and any technical aspects required to run the business.
Affordability
A franchise that comes with steep costs may not be affordable for most prospects. Before you take the franchise route, determine whether the prospective franchisees can pay for the franchise in question.
What Steps Do I Need to Take to Franchise My Business?
Create a Business Plan
The first step to a successful franchise in Australia is a deep understanding of the market. Essentially, you should prepare a robust business plan for your franchise mission. The Australian Competition & Consumer Commission (ACCC) is the governing body for franchising in Australia – it is therefore imperative to comply with the ACCC Franchising Code of Conduct when it comes to writing your business plan. Knowing what the market needs can also help you establish the right operating guidelines for your franchise and the kind of Package you will give to a franchisee. Areas that the business plan should cover include:
- A full analysis of the financial projections of both your business and that of the franchisee
- Profit margins and cost profiles
- Cash flow of the business and consider the associated risks
- Analysis of how sales will build up over time
- The management service fees you might charge a franchisee
Pilot the Operation
Your next step is to test out your concept as a franchise. Work with the right franchise experts to set up an ideal pilot operation covering one or several outlets. A successful pilot program helps you determine if your business can be run as a franchise and the issues that should be addressed.
Prepare a Franchise Operations Manual
After a successful pilot program, your next step is to prepare a Franchise Operations Manual that provides a detailed explanation of your operating systems and how they should be run. An operations manual is basically the blueprint that guides the franchisee on the day to day business operations. It is also a training tool that you use to train franchisees and which the franchisees use to train employees. A franchise agreement typically references several parts of the manual, and creating one should be your top priority. It is an excellent practice to work with franchise professionals when developing a franchise operations manual.
Create Franchise Agreement
A franchise agreement is an integral part of the business relationship between you and the franchisees. It is a crucial source of protection for your brand and must include:
- The length of the agreement
- The rights of renewal
- The obligations of both parties
- The termination provisions
- Provisions for unforeseen challenges such as the illness, death, or incapacity of the franchisee
Training of the Franchisee
The next step is to decide the type of training your franchisees to need and how long the training will take. You should also decide on the locations of the rating, the cost, and the parties to train them.
Decide on Investment Costs
Determine the amount of the initial fees and the ongoing payments that your franchisee will be making. Don’t include a massive profit element in your initial fee, as doing so can discourage prospects. Ideally, most of your returns will mainly come from ongoing fees that can balloon with the improved performance of the franchisee.
Choose an Ideal Franchisee
There are several methods of finding ideal franchisees. However, the most reliable sources are franchise websites, franchise magazines, national newspapers that carry franchise features, and franchise exhibitions. You can also take a look at Australia’s business start-up market that typically teems with promising prospects.
Set Up Management and Support
You will need a franchise management team that will provide ongoing support to your franchisees. Because they are responsible for recruiting, managing, and supporting your franchisees, ensure your team has the right skills, knowledge, and resources to undertake a stellar. Some of the critical roles of management and support team include:
- Selecting the ideal franchisees
- Monitoring performance and reporting
- Carrying out credit control
- Providing technical advice for franchisees
Why You Need Professional Help
Leveraging the skills and expertise of franchise consultants can be a great way to have a solid understanding of franchising. Franchise experts such as accountants, solicitors, and attorneys bring an extra perspective to your business and help with feasibility studies, operating manuals, business plans, and advice on funding.
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