How to find a franchise

Buying into a franchise can be a rewarding business decision - but with so many franchise systems out there, how do you go about choosing the best one for you, and then funding it? Rebecca Spicer investigates

From dog washing and home maintenance to juice bars and fitness gyms, the list of franchise models in Australia is long, and the options for potential franchisees are daunting.

Before starting to sift through these, you need to be sure a franchise business model is right for you. "Some people are suited to having an employed job, others are more suited to, or prefer to run, something completely independent," says Adrian McFedries, director of franchise consultancy, DC Strategy. "Franchising represents an opportunity to be in business but at the same time be part of a broader network."

A major benefit of entering a franchise is that it can significantly reduce the startup risk of a business, explains McFedries. This doesn’t mean it’s foolproof, though. With the number of franchise systems per capita in Australia being four times higher than in the US, it’s a competitive market and one that requires dedication and flexibility by the franchisee to fit within a franchise structure.

From a funding perspective, Jason Cannock, national manager of retail and franchising for ANZ Bank, agrees that franchises have a lower propensity for failure than an independent business. "This is because the franchise system has been in existence for some time and has a developed model and a brand recognition that any new franchisee can leverage.

"That said, it is still critical that franchisees complete a thorough due diligence to help determine if it’s the right business for them. This includes assessing the operational history and competitive advantage of the franchise, existing franchisee satisfaction, marketing and franchisor support and, most importantly, what level of success they expect to achieve."
Mitch Jones, a 19-year-old who opened the 60th Cold Rock franchise in Victoria’s Berwick earlier this year, says the lower risk level was a big drawcard. "I thought to get the stability and predictability that a franchise offers was the best way to get into the small business field, and it would give me good backing for when I wanted to go out and do something on my own."

Risk was also a consideration for Susan Mason when she decided to buy into the Mortgage Choice franchise six years ago. When her husband became ill and, under doctor’s orders, had to stop work, it was up to Mason to support her young family financially. Despite the risk of going into business, she had some experience under her belt and felt this was how she could earn the highest income. "I knew that being self-employed gave me the capability of determining my own income level by my own results," she says.

Choosing the type of franchise business to enter will largely depend on what the business owner has a predisposition to, explains McFedries. "So, do they want to be a mobile operator or do they want to be in a bricks and mortar type franchise? Do they want to be business-to-consumer or business-to-business? At a very high level it’s about what people think they’ll enjoy."