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Franchising your business

Posted by Carolyn Dufton on 8 July 2010
Franchising your business

Sharing a business through Franchising

Has anyone ever asked you if they can "buy into" your business?

A business has been approached by a third party who has expressed interest in buying into their business.
This prompts the business owner to consider if and how they could include the interested party in their business.

  • Could they offer them a partnership?
  • Could they sell them a licence?
  • Could they become an agent?
  • Or should they consider franchising?

The reality of the situation is that a business cannot choose whether to call themselves a franchise.

Franchising is a regulated industry and is governed by the Franchising Code of Conduct.  If you are operating within certain parameters you are by definition a franchise and have to conform to the franchising code.

Nor can you engage a franchisee without having provided the legally required franchise documentation.

What are the franchising parameters?

A franchise exists by definition when;

  • one party (the franchisor) grants another party (the franchisee) the right to carry on the business of offering, supplying or distributing goods or services under a specific system or marketing plan
  • the franchise business will be substantially or materially associated with a trademark, advertising or a commercial symbol owned, used, licensed or specified by the franchisor
  • the franchisee is required to pay, or agree to pay, a fee to the franchisor before starting or continuing the business.

Simply because a business is called a licence or distributorship does not mean it cannot be a franchise. If a licence or distributorship meets the above definition, it is most likely a franchise and must comply with the code.

Franchising is not a dirty word

So what if the system that suits your business best should fall within the franchising definition? Well don't be scared, franchising is nothing to fear if approached professionally.

In fact. franchising your business could be the best thing you ever did!

Franchising is an involved process which necessitates expert input. It is not a quick procedure and cannot be "rushed through".

Contrary to many business owners' belief, there is no need to wait for a potential franchise buyer before proceeding with the franchising process.

Having a potential buyer in the wings is a comfort, but is not the norm.

Are you concerned that your existing business may fall within the franchising definition?  What could the consequences be?

The ACCC has the power to prosecute any deemed franchise that is   not complying fully with The Franchising Code so act decisively;

  • Firstly, seek expert opinion to ascertain whether the business is technically a franchise.
  • Engage a franchising expert to conduct an in depth analysis of the current business model and the proposed franchising model including financial scrutiny.
  • If the franchising feasibility stacks up, proceed down the franchising path with haste!
  • If franchising does not appear to be viable, the franchising consultant should suggest an alternate business model.

The benefits of franchising are numerous;

  • Franchising is the ultimate in business leverage
  • Documented control over the application of your business system and service
  • Upfront franchisee fees provide cash injections into your business
  • No outlay for expansion costs e.g. fit out, stock etc
  • Ongoing franchise fees
  • Effective distribution
  • No employees!! Franchisees are self motivated business owners
  • No more working "in" your business.

The advantages are plentiful.

Could franchising be your vehicle to success?

© franchisingplus

All rights reserved. No part of this publication may be reproduced or transmitted by any means, electronic, photocopying or otherwise without prior permission of the author as permitted under the copyright act.

Carolyn DuftonAuthor: Carolyn Dufton
About: Carolyn Dufton Dip. Bus (Franchising) heads the team as the owner and manager of franchisingplus. Carolyn has a wealth of small business experience, and many years of hands on franchising experience.
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Tags: Franchisee Franchisor Franchising

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