Does franchising look more than ever to be the new black for small business? asks Tanya van der Wall and Carolyn Evans.
Revisiting a paper developed originally for our client, the Australian Business Foundation, the team reviews signals that franchising is becoming a business model in itself, not just a vehicle for growth or a phase in the business life cycle.
In July 2010, amendments to the Franchising Code of Conduct were welcomed by many in the industry as striking a reasonable balance between the obligation on franchisors to disclose all relevant information, and a franchisee’s own obligation to undertake due diligence, not least to determine the appropriate fit with the franchise system.
But, as with so many sectors in the Australian economy, even where these obligations are in harmony, access to skilled people remains one of the challenges to growth. Finding suitable franchisees remains a high priority for many franchisors – a better understanding of the personality traits and skills required would assist franchisors better inform their stringent selection processes.
It is a problem of many parts though – not least the risk for franchisees if suitable successors cannot be found in appropriate locations, meaning the business cannot be on-sold as a result. Few franchisees realise that succession planning from the outset is crucial for the protection of their own investment.
And, while the sector remains optimistic about the growth coming out of the (latest) GFC – reporting ongoing intentions to recruit new franchisees – where to find those star recruits will continue to challenge the sector.
Then there is the daily reality of running a franchised business – read on for the backstory on a growth phenomenon.