Getting it right
Franchising is no guarantee of success but it is a fantastic model of entrepreneurship that can deliver great rewards.
Franchising works when everyone involved is profitable. Franchisor, franchisee, supplier all need to be getting a good return on their investment.
There are some extraordinary examples of franchisees who are building strong business empires of multiple units, and Inside Franchise Business chats with some of these high-fliers in the first of a brand new series showcasing spectacular franchisees.
From endota spa to Subway, success can come in any sector, for franchisees with any background. All it takes is...well, you’ll have to turn to page 50 to discover what has helped them succeed.
There is, however, no guarantee of success - stellar or otherwise. Like any business, a franchise is dependent on any number of factors for it to be viable. Some of these are within the control of the owner/operators, others are external influences that can have an impact on the development of a business.
At the time of writing, the Retail Food Group was in the spotlight following an investigation by Fairfax Media, which alleges the franchisor runs a business model that isn’t working for franchisees.
As Bruce Billson, executive chairman of the Franchise Council of Australia acknowledges, allegations of behaviour that is likely to breach the laws that regulate franchising in Australia, warrant further investigation.
RFG, which manages many household name franchises including Donut King, Gloria Jean’s and Crust Gourmet Pizza, has vigorously denied the claims and referred back to its financial disclosures for evidence that the business model is effective.
In circumstances such as this, when the media’s attention is drawn to franchisees operating unprofitable businesses, it is common to place the blame for failure with the franchise model or franchising in general.
Whatever the particulars of the RFG situation, there are lessons to learn about profitability suggests Greg Nathan, founder of Franchise Relationships Institute (FRI).
"Perhaps it’s time all franchisors reflected on the health of their franchise networks — culturally and commercially — and asked themselves this important question: “Would you invest as a franchisee in your own network?”
The good news is that extensive research at FRI shows 81 per cent of franchisees across the sector do believe their franchisor acts fairly, Nathan points out.
And there is plenty to celebrate in franchising.
“Franchising is the best model of entrepreneurship. It offers a three-fold increase in the likelihood of small business success compared to a standalone start-up small enterprise,” says Billson.
What is crucial is that franchise buyers do solid research before committing to any business offer.
Turn to the Franchise Basics advice section in this edition for further pointers about what to consider about investing in a franchise.
And for some inspiration, check out the new brands putting their future in franchising, and read about some of the established brands that have backed the business model: Red Rooster, and this month’s cover story, the award-winning G.J.Gardner Homes.