small business franchise
Jack Richings

Jack Richings

Small Business Franchise – What To Consider

Franchising is a great way to operate your own business under an already established model. We weigh up the perks/drawbacks of a small business franchise.

Have you ever considered investing in a small business franchise? There are so many different opportunities about these days, offering the flexibility to do what you love without the hard yards. You take on an already well-established business model and essentially jump on the bandwagon.

But is it worth it? And what do you need to consider before franchising? Here is everything you need to think about with a small business franchise.

What is a Small Business Franchise?

So what exactly does it mean to franchise a business? 

Put simply, franchising is a business model that allows one business to operate under the established brand of another business to offer its products and/or services. This is usually determined by a specific time period and can be a great alternative to setting up your own business.

We will take you through both the advantages and disadvantages that come with a small business franchise.

should I franchise a small business?

Advantages of Franchising

One of the main perks that come with franchising a business is saving you the time, cost and effort of setting up your own business from scratch and establishing yourself in the industry. This has already been done for you. The advantages include:

  • You operate under an established brand. This means that you take on their reputation and the product or service they offer. You don’t have to establish a new product on the market.
  • You get help setting yourself up. You will get the benefit of expert advice and insight on things such as lease agreements, shop fit-out and more.
  • The right equipment. You will also be sorted out with the right equipment to sell product and/or operate a service.
  • Advertising and marketing support. If you set up your own business from scratch, a lot of your time, money and effort will go into advertising. With a franchise, you will get support with this.
  • Training and ongoing support. You will be trained to run your business effectively and given the right kind of support throughout.

Disadvantages of Franchising

While it sounds well and good to jump on board with an already established business, it does come with its downsides.

  • Less autonomy. When it comes to the business decisions, you won’t have much of a say over processes or operation.
  • Location restrictions. You will only be able to operate in a restricted area, so won’t be able to grow and expand.
  • Ongoing fees. Naturally, you will be expected to pay ongoing fees when you franchise a business.
  • No guaranteed future. At the end of your lease agreement, the franchisor does not have to agree to renew your franchise. This means you could be left with nothing.
  • Hard to sell. If you do decide to sell your franchise, you have to follow certain procedures and have it approved by your franchisor.
franchising

Should I Franchise a Small Business?

Like any business decision you make, it is important to consider your options carefully. Firstly, there are laws that need to be followed in Australia, including the Franchising Code of Conduct and the Australian Consumer Law (ACL). It is worth looking into both of these and determining what they mean for you.

As you can see above, while franchising has many benefits, it can also be very restrictive. You will to weigh up the pros and cons and consider the costs of:

  • Upfront fees
  • Establishing and maintaining the business
  • Any expenses you might need to cover

Factoring in all these costs, along with the restrictions you will face, will give you a better idea of whether this is the right business decision for you. It also helps to consider how much hard work and capital is involved in setting up and establishing your own business. By weighing up all these factors you will have a clearer understanding of what you are looking for.

So What’s Next?

If you are interested in franchising a business then get to know it inside and out. Look at their products, use them, or engage in their services. Ask their customers for reviews and what they love about the business. 

It is important to have a good overall picture of the business before you even enquire about franchising. Once you enter into the agreement with the franchisor, it is legally binding, so you want to make sure it is the right move for you.

what next for your small business?
Do your research and understand how everything works.

Setting Up a Small Business Franchise

Once you decide to go ahead, it is important to get the right advice. The team at ALC Commercial can take a look at what is on offer and walk you through the process. It is important to ensure all legal bases are covered and you go into it with your eyes wide open. Seeking professional help is the best step to ensuring your franchise is set up for future success.

For more information on business finance, talk to our experienced and understanding loan specialists to see how our business loans can support your business goals.

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