Franchising: What It Is And The Pros And Cons Of Franchising

Ensuring Corporate Documents' Enforceability - What to Know

30/06/2022

Are you planning on opening a franchise in Australia? If so, the chances are that you believe buying your own business is a safe way to get things started. However, you must be aware that there will be risks and challenges that you will face and must understand before you sign your name on the contract.

So, is franchising for you? Let’s talk about that:

What Is Franchising?

Franchising is when a company sells the rights to operate its business. In terms of you, this means they will sell you the right to use the brand, product, and marketing techniques used by the parent business. This will often mean that you will not have to worry about things like location, staffing, and the like. In addition, the parent business will also provide you with certain training and support when you are setting up your business.

When it comes to payment, the parent business will usually charge the owner a percentage of the sale that they complete, which is known as a royalty fee. This will be paid monthly and is normally a percentage of the company’s revenue.

What Are The Pros Of Franchising?

For many business owners, franchising is a great way to get started in their chosen industry. Here are a few of the top benefits accorded to business owners who buy a franchise:

1. Brand Recognition

One of the biggest benefits of franchising is that the parent company will already have established a brand name and reputation. These businesses have likely been in the market for some time and will have a solid customer base and following. This means that you will have an easier time attracting customers to your business.

2. Supply Chain

Another benefit of franchising is that you will get to work with a well-established supply chain. The parent company will likely have established suppliers that have been vetted and approved. This means that you will avoid having to set up your own supply chain from scratch.

3. Infrastructure

If you buy a franchise, it is likely that you will also get to use the parent company’s infrastructure. This includes things like training and marketing support services. For example, the parent business will likely provide you with a training blueprint that they use to train their own employees. This should reduce the amount of time you spend training your staff since you already have a program ready.

What Are The Cons Of Franchising?

While franchising offers a ton of benefits, there are also downfalls that one needs to be aware of:

1. Requirements

Franchising is not a get-rich-quick scheme, to put it bluntly. You will have to have a lot of capital in order to buy a franchise, and you will also have to have a lot of patience. You will need to be prepared to wait a long time before your business will start to make money.

2. Restrictions

When you buy a franchise, you will be told exactly how to run your business. You will not get to use your own ideas and creativity when it comes to running your business. What you learn from the parent company must be applied to your store without fail. If you do not stick to the rules, the parent company can take action against you, which could cancel your franchise.

3. Loss of Liberty

Since you are essentially working with a business, you will not have all the freedom you want. For example, if you are flipping burgers and decide you want to mix in some cheese, you might get in trouble for trying to come up with your own recipe for burgers. In other words, you aren’t your own boss, and that, for many people, is a big con.

Conclusion

So, is franchising for you? It all depends on what you want. If you want to start a business that’s already recognised and has all the plans laid for you, then franchising can be great. On the other hand, if you want to start a business where you’re free to do anything you want, then it may not be for you. Simply put, understand what you want, and go from there!

GLG Legal is an innovative commercial and property law practice offering real-world solutions to meet any needs. If you are looking for commercial lawyers in Brisbane to help you get started with franchising and more, reach out to us today!

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