More people are seeking to enter the multi-billion-dollar franchising industry. But what makes a successful franchise?
THERE has been a surge of interest in franchise opportunities in the past year by Perth business people eager to secure a slice of the growing sector, worth $128 billion.
Franchise Alliance of WA state manager Mark Fernandez said with rising unemployment as a flow-on effect from the economic downturn, enquiries to the consultancy and advisory firm had increased by 15 per cent since January.
Australia's franchising sector is in the midst of a growth period, and now comprises 70,000 franchisees representing almost 1,300 franchising systems.
While many of the franchises in Western Australia are local products, including Car Care Suite, Mortgage Choice and Dôme, others are global enterprises, such as McDonald's, Curves, Sign-A-Rama, Subway, and Jani-King.
People venture into franchising for many different reasons, but why buy a franchise?
What makes a successful franchise operation? And what are the disadvantages of the franchise system?
Mortgage broker Mortgage Choice discovered that more than one-third of Australians planning on purchasing a franchise in the next three years have been motivated by the difficult economic climate.
The company's third annual Potential Franchisee Survey revealed potential for earnings had become the primary reason for Western Australians wanting to run a franchise operation.
Of those seeking to move into franchising by June 2012, 38 per cent said the economic downturn had influenced their decision.
Senior corporate affairs manager for Mortgage Choice, Kristy Sheppard, said for most respondents, earning a decent income took precedence over job satisfaction and flexibility.
"Working to live rather than living to work is still an important motivator for potential franchisees in WA, but the income that can be produced via running your own business is presently the most important factor for the growth of the franchising industry," she said.
In his book, Franchising in Australia, Garry Williamson, who is managing director of specialist advisory firm The Franchise Centre, lists more than 20 advantages and disadvantages of buying a franchise.
He believes people with an entrepreneurial spirit, who are motivated by success and not greed, are likely to succeed as franchisees, with greed and ego usually the common denominator in failed franchising ventures.
Mr Williamson said those franchises with a proven business model that offered support and training, and practised open and transparent communication between franchisors and franchisees, usually stood the test of time.
Raffael Fernandes, online account manager for Franchise Business Australia, the largest online directory for people looking to buy a franchise, said a recent survey by research firm 10 Thousand Feet found the four top motivating factors for people becoming involved in franchising were status, security, lifestyle, and earnings.
He said the most established brands, which offered extensive training and support, had a proven business model that offered flexible working hours and a fair work-life balance, were often the most successful franchises.
Mr Fernandes said franchisees did not necessarily require previous market experience to be part of a flourishing system, but they did need the right attitude.
"Franchisors look for people with passion for the job and have a strong desire to succeed and are highly motivated," Mr Fernandes told WA Business News.
"They look for the types of qualities you can't measure on paper."
The Franchise Council of Australia, a not-for-profit trade association representing franchisors, franchisees and service providers, believes while disadvantages exist, the benefits to franchising outweigh any pitfalls.
"Franchising has quite a few advantages over stand-alone, start-from-nothing small business enterprises, and those things are an existing brand with existing customer recognition, an existing network, and a mode of operation," FCA chief executive Steve Wright said.
"You don't have to work it out for yourself; it's already been worked out by the people who created the brand and implemented it.
"You're in business for yourself, not by yourself.
"To me, there are no pitfalls to franchising versus any other type of small business, there is a risk still as there is with any business, and you can't do it without there being an element of risk.
"A really important part of what you do when you are looking at franchising is, work out what you are prepared to risk and then try to match that with what is available in terms of the type of business you'd like to be in, where you would like to be doing it, and what kind of demands on your time and your family's time it's going to make."
Mr Wright said those franchises that thrived consisted of motivated, business-minded people, passionate about their industry, and willing to work in a pre-determined system.
"There is not one single magic ingredient that makes a franchise successful, but what I can tell you they have in common is they have a way of very clearly defining how they do everything in the business," he said. "So there can be no ambiguity, and that gives consistency of service delivery and product delivery that the customers relate to."
As the biggest franchise in Western Australia measured by the number of outlets, Jim's (WA) offers consistent service, evidenced by the company's number one ranking on the WA Business News 'Book of Lists' for the past five years (see page 22).
Jim's chief executive Jim Penman believes the success of his franchise in Western Australia, which now numbers 220, comes from a focus on service.
"We're so well-known here that most people in Australia, a great majority, would actually have used us or know somebody well who's used us, so what really counts is the level of service they get when they come through," he said.
Mr Penman said his franchise, which started in Victoria, had a minimal advertising bill - about $3 million worldwide, or 2 per cent of turnover - and developed the brand through the quality of its service and word-of-mouth advertising.
Lenard's chief executive Bruce Myers believes a successful franchise is only as successful as its franchise owners. He said franchisors must work closely with franchisees to ensure all parties were working towards the same goals.
Since the first Lenard's chicken store opened in 1987, Lenard's has sold more than 400 million chickens nationally, served more than 130 million customers and injected more than $1 billion into the Australian poultry market.
Lenard's now has more than 2,900 people working in 190 franchises across Australia, including 25 in WA, and 28 counters in supermarkets.
On August 6 the specialty chicken retailer released its end-of-financial-year report, revealing gross profit of its franchised stores had grown 52.5 per cent.
Joondalup-based franchisee Craig Mason said that, with 900 franchises around the world, 88 in Australia and 10 in WA, Sign-A-Rama's strong brand and long-term growth focus attracted him to the franchise in 1995.
"You always have the thought you could save the money and just buy the gear yourself and start up your own business, but with a franchise it's highly organised as a group, so there's that great side of strength in numbers," he said.
Mr Mason said the security of an umbrella company in a franchise system meant poor-performers or stores in unsuccessful locations had a central, overarching support base.
