7.4.2021

How to Start a Franchise in Australia

Written by Kadence Edmonds

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If you run a successful business, you may have considered opening additional locations to maximise revenue, explore new markets, and satisfy the growing demand from customers. 

But have you ever considered the option of franchising your business instead? Through this increasingly-popular business model, you can increase your capital and grow faster without the hassle of managing each individual location yourself. 

Although franchising may seem like a daunting task to begin with, it’s important to remember that all large global franchises had to start somewhere. 

Franchising can also provide the initial business owners with significant growth opportunities - and this means that it’s important to take the time to plan your franchise structure and establish clear goals and objectives. 

Let’s look at how to start a franchise in Australia, and consider why it may, or may not, be the right move for your business.

When should you franchise a business?

If your business is successful, growth is the natural outcome. To manage the growth, you could look to move to a larger building to help satisfy demand, or instead, open a second location in a new area. Either way, you’re taking action to increase revenue and help keep your customers happy. 

While opening multiple locations is generally effective for successful businesses, the process can be slow and tedious, often requiring a significant degree of management. Since you can’t be in two or three places at once, you need to trust the managers at these locations, and hope they can run the business to your standards. 

For many business owners, franchising is a more effective way to grow their business. Through this model, another entrepreneur pays you an initial fee to replicate your business in a new location. They have access to your business model, marketing materials, coaching, and everything else needed to run the business. In return, you earn a fixed percentage of all revenue they generate. 

Here are some questions to ask yourself if you are considering franchising:

  • Is your concept saleable? 
  • Can someone else replicate your success? 
  • Are you prepared to spend more time managing franchisees instead of running your business? 
  • Will the franchisee earn a return on investment after paying you?

How to start a franchise business in Australia

Have a solid business model 

It’s always going to be easier to scale up an already-existing business into a franchise. If you can’t provide data from an existing business, then it will be harder to sell a franchise model to any potential franchisee. An existing, profitable business will make it easier to show results using a proven formula.  

However, it doesn’t always have to be your own business model. This can be the case when bringing an existing international franchise into Australia. In this case, you would be acting as the franchisor locally and would be purchasing the rights to sub-franchise in the country.  

Research well 

When looking to franchise a business, take into consideration the industry it operates in.  

You should thoroughly research:

  • Any competitors in the industry
  • Similar franchises that already operate and what can distinguish your model from them
  • Any franchise laws that are likely to apply to the business. 

After performing thorough research in these areas you will have a strong understanding of the industry and market and be able to adjust your business model to suit accordingly.  It will also allow you to pre-empt any potential issues or problems that may arise when franchising.  

Seek professional advice

When it comes to starting a franchise it’s always best to seek professional advice. This can include advice from lawyers, accountants and business advisors. The benefit of this is that you can get feedback on your business model and plans and whether it will confine to Australian laws. You will also be able to receive valuable input from experts on ways to meet your business goals.  

Seeking professionals who have experience in assisting other franchise owners will be a benefit because you will be able to hear about real-life experiences.  

Another benefit is that franchises have ongoing accounting and legal obligations, so if you implement best practices from the beginning then you will benefit long term.  

Develop a recruitment strategy

Recruitment is an important aspect when looking for potential franchisees. Because of this, it is beneficial to develop a strategy that can be used for recruitment across all locations.  

A thorough recruitment strategy is essential in the early stages of franchising because your initial franchisees will be the starting image of your business journey. You may find it beneficial to recruit previous employees to be your first franchisees as they will already know your business inside and out. You will also know, due to past work experience, that they will be good brand ambassadors for your franchise.  

Establish training standards

The level of care does not just stop at finding the right franchisee. You will also need to be able to provide them with training materials that will further help their knowledge and lead them on a successful journey.  

This training could include a guide on a particular type of technology, like a POS system or kitchen recipe requirement that needs to be followed completely.  It’s key to take a step back and think about all the information that your franchisees will need to ensure they are successful at maintaining the brand.  

Plan for success

Take into account all of the research and expert advice and plan out what you want the franchise to look like. This is the time you need to establish a complete list of all of the details you will offer to franchise owners and what you expect from them in return.  

With thorough and detailed processes and plans, it will ensure you are in a better position to maintain a standard level in the franchise network and provide customers the best product and service.  

Consider the following:

  • Will franchises only be able to operate in exclusive areas?
  • Will potential franchisees have to provide a police check or other licences prior to approval? 
  • What are the minimum requirements that need to be met for potential franchisees before they can operate a business?
  • Will there be ongoing support for franchisees and what will it be limited to? 
  • Will there be any rules around marketing or will there be a marketing fund to cover all franchise operators? 

Benchmark fees 

Because the main aim is to have a profitable franchise system and expand by attracting new franchisees, you need to ensure that the fees charged are reasonable.  

With franchise systems there are generally two types of fees to consider, initial and any ongoing. 

The initial fee is paid when a franchisee passes all preliminary qualifications and purchases the business. Then ongoing fees are charged to continue to give the franchisee the rights to actually use your franchise system and branding. Furthermore, ongoing fees can also include a marketing budget, and for the use of any franchise software used in the network.  

When establishing these fees, you need to ensure that potential franchisees can see the value in what they are charged and you as the master franchisor need to be able to run the network at a profit.  

Draw up your franchise documents 

Documentation is another important factor in franchise networks.  At a bare minimum, you will need to have a franchise agreement as well as a disclosure document. In addition, you may require some of the following documents to be completed by franchisees:

  • Confidentiality agreements 
  • non-compete deeds
  • Property licences 
  • Personal guarantees

During this important step, you should be seeking the advice of a franchise lawyer. In Australia, franchise networks are highly regulated, so with professional advice, you will know exactly what you can and can not include in your franchise agreements.  

Additionally, there are strict rules in Australia around how potential franchisees can enter into a franchise agreement. It is best to seek professional advice so you are following the rules and don’t get caught out when setting up new franchises.  

Start your franchise in the right way with the Epos Now point of sale system

All businesses need reliable technology to power their operations. This is especially crucial in franchise networks.  One of the most important devices you’ll purchase is the point of sale system, or POS. 

A POS can help franchises with:

  • Process a range of payment types
  • In-depth inventory tracking 
  • Managing staff roles 
  • Running payroll
  • Selling seamlessly online
  • Keeping track of the entire franchise network

If you need a reliable POS system for your franchise owners, choose Epos Now. Call today to learn more.

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