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What is Franchising?

 

Franchising as a concept is not a business itself, but a methodology of doing business. Franchising allows for the rapid expansion of a business system by the licensing of intellectual property using tried and proven methods of doing business. Franchising can be defined by the relationship between the franchisor, who is the owner of the business and intellectual property, who licences to independent people or companies known the franchisees the rights to market and distribute the franchisor’s goods or service, and to use the business name for a fixed period of time. The contract will provide for an assignment for an initial fee plus an ongoing royalty for the right to conduct business under the name of the franchisor.

Franchising is in essence an innovative marketing tool that enables a company to distributing goods and services in a cost efficient manner by maximising economies of scale that would not normally be available to the small business owner. It is an extremely successful method and one of the largest growing industries in the Australian and international markets.

The International Franchise Association defines franchising as a “continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organising training, merchandising and management in return for a consideration from the franchisee”.

There are a number of franchising systems the most common of which can be described as business concept franchising however there are different methods for example: retailer- retailer where the franchisor markets products or services under the franchisors name through a common standardised system. Wholesale-retail franchise where the franchisee purchases products from franchisor for sale in the retail market. A manufacture-retail franchise where the manufacturer franchisees its distribution network or a Manufacturer- wholesale franchise where the manufacture under licence produces the franchisors products.

As can be seen above there are a multitude of options available to any business that wants to expand using the franchise model. At Quinns our experienced franchise team can help you chart a course through the legal and financial problems you will experience when setting up selling or buying a franchise

The franchisee’s regular payment to the franchisor usually covers various tangibles and intangibles such as ongoing assistance, training, advice, support, access to business systems and marketing strategies. In effect, as a franchisee you are buying a readymade, pre-packaged business. These areas can require audited books and may subject the franchisee or the outlet to periodic and surprise spot checks. Failure of such tests typically involves non-renewal or cancellation of franchise rights.

In Australia, franchising is one of the fastest-growing business sectors worth an estimated $80 billion a year. There are thousands of different franchises with more than 60,000 outlets.

Franchised businesses have a higher success rate than most small businesses and are typically more profitable from the beginning. In spite of this, any business is risky and demands intensive research before you part with any money it is advisable to consult with experts in the field before embarking on any franchising opportunities.

If you’d like more information or if you would like to discuss a particular Franchising matter, please complete and submit the Express Enquiry form on the top right hand side of this page and we will contact you to discuss your enquiry or call us on 1300 QUINNS (1300 784 667) to arrange an appointment.