The pros and cons of owning a franchise

February 20, 2024
5
minutes to read
by
Michael Nuciforo
Table of Contents

Franchises have become an increasingly popular way to operate a small business in recent years. They offer the opportunity for entrepreneurs to own their own businesses without having to start completely from scratch. But before you jump in, it’s important to understand the pros and cons of franchising. This article will discuss the best franchises to operate in Australia and what you should consider when deciding if a franchise is right for you.

The pros of franchising

When it comes to franchising, there are many advantages that make it an attractive option for business owners. Firstly, franchises already have established brand recognition and customers, which can give your business an edge over competition in the local market.  

Secondly, franchised businesses typically receive advice and support from experienced professionals who can help guide you through the process of setting up your business and managing the day-to-day operations.  

Finally, operating a franchise can provide access to resources such as equipment, supplies, marketing materials and more at pricing that may not be available to independent business owners.

The cons of franchising

While there are many advantages to running a franchise business, there are also some drawbacks that must be considered before making a decision.  

One major disadvantage is that you will be required to pay fees associated with running a franchise such as royalties or marketing fees. Additionally, most franchises have strict rules about how operations should be run which can limit your control as a business owner. For most business owners, being able to control your own destiny is a huge attraction to starting a business, so this can become a sore point.

In addition, since franchised businesses rely heavily on brand recognition and reputation, any missteps or negative press could affect your ability to succeed as a franchise owner. For example, if another franchise owner is caught underpaying staff, the negative attention will likely have flow on impacts to your business even if you are doing the right thing.

The best franchises in Australia.

Now that you know the pros and cons, to help you think about which franchises could be a good fit, we have listed the top businesses you can franchise in Australia.

1. Boost Juice  

Boost Juice is a very popular Australian-based chain of juice and smoothie bars that was founded in 2000. The company has over 400 stores across Australia, New Zealand, Asia, and the Middle East. Boost Juice is best known for its healthy juices and smoothies made from fresh fruit and vegetables. The organisation is well run, and franchisees get plenty of training and support from the parent company.

2. Domino's Pizza  

Domino's Pizza is a global pizza delivery chain that was founded in 1960. The company has over 11,000 stores across 85 countries. Domino's Pizza is best known for its delicious pizzas, as well as its convenient online ordering and delivery service. Domino’s Australia is particularly well regarded, having been listed on the ASX, the organisation is known for running a tight ship.

3. Subway  

Subway is a global chain of sandwich shops that was founded in 1965. The company has over 44,000 stores across 110 countries. Subway is best known for its fresh sandwiches made with quality ingredients on freshly baked bread. Subway is popular with workers looking for a quick and health lunch option.  

4. KFC  

KFC is a global chain of fast-food restaurants that was founded in 1930. The company has over 20,000 stores across 120 countries. KFC is best known for its fried chicken, as well as its signature side dishes such as mashed potatoes and coleslaw.

5. McDonald's  

McDonald's is a global chain of fast-food restaurants that was founded in 1940. Being one of the most recognise brands in the world, the company has over 36,000 stores across 100 countries. McDonald's is best known for its hamburgers, fries, and milkshakes.  

Franchising FAQs

What is a franchise?

A franchise is a business model in which a franchisor grants a franchisee the right to use their trademark, business systems, and support to operate a business.

What are the benefits of franchising?

Franchising allows you to operate a business with a proven track record of success and established brand recognition. It also provides you with support and guidance from the franchisor, including training, marketing, and ongoing operational assistance.

How much does it cost to buy a franchise?

The cost of buying a franchise can vary significantly depending on the type of business. Initial franchise fees typically range from $10,000 to $50,000, and ongoing royalties range from 4% to 10% of gross sales.

What should I look for when considering a franchise?

When considering a franchise, you should research the franchisor's history, financial stability, and level of support they provide. You should also consider the initial and ongoing costs of operating the business and evaluate whether it fits your skills and interests well.

Can I operate a franchise as a side business?

While it is possible to operate a franchise as a side business, balancing the demands of a full-time job with the responsibilities of running a business can be challenging. It is important to carefully evaluate the time commitment required before investing in a franchise.

What are the legal obligations of a franchisor and franchisee?

Franchisors must provide prospective franchisees with a disclosure document that includes information about the business and its history, the franchise agreement, and the costs associated with operating the franchise. Franchisees must follow the franchisor's operational guidelines and pay ongoing royalties.

Can I sell my franchise?

Franchise agreements typically include provisions for the sale of the franchise. However, the franchisor may have the right to approve the sale and may require the buyer to meet specific qualifications before agreeing.

What happens if the franchisor goes out of business?

If the franchisor goes out of business, the franchise agreement may be terminated, and the franchisee may be left with a company no longer supported by the franchisor. It is important to evaluate the franchisor's financial stability and track record before investing in a franchise.

Franchises offer the opportunity for entrepreneurs to run a business without taking on all the risk of building something from nothing. When choosing the best franchises to operate in Australia there are several factors that need to be taken into consideration including brand recognition, resources available, costs associated with running the business and more. While there are many advantages associated with franchising such as professional guidance and access to resources, potential pitfalls such as high overhead costs must also be considered before deciding if this type of venture is right for you. Ultimately it is important that you do your research, including speaking to existing franchisees, so they can make an informed decision about whether a franchise is right for you.

DISCLAIMER: Team Thrive Pty Ltd ABN 15 637 676 496 (Thriday) is an authorised representative (No.1297601) of Regional Australia Bank ABN 21 087 650 360  AFSL 241167 (Regional Australia Bank).  Regional Australia Bank is the issuer of the transaction account and debit card available through Thriday. Any information provided by Thriday is general in nature and does not take into account your personal situation. You should consider whether Thriday is appropriate for you.

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