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What is Franchising?

 

Did you know…

  • Australia has approximately 850 franchise systems operating
  • around 92% of these are Australian based
  • Australia has 3 times for franchised units per capita that the USA
  • during 2002-2004 less than 1% of Franchisees were involved in a substantial disbute (involving a solicitor)
  • 60% of systems have less that 30 franchised units, 15% have over 100.
  • current annual turnover is $80 billion (12% of GPD)

Characteristics of a Franchise…

  • An arrangement between a franchisor who grants to a franchisee rights to use a particular mark usually a registered trade mark but it need not be, or a name to be in connection with the sale and/or distribution of goods or services.
  • The business of the franchisor substantially identified by the public is being associated with the mark or name (eg: McDonalds, KFC). 
  • The franchisee is required to conduct the business or that part of the business subject to an agreement in accordance with the marketing business and technical plan or system specified by the franchisor in an operations manual.
  • The franchisor provides ongoing marketing business and/or technical assistance during the term of the agreement. In dealing with the franchise arrangement, it is usual for there to be:
     

 A requirement placed upon the franchisee to pay the franchisor an initial franchise fee and ongoing royalty service fees which are normally a percentage of the gross sales, or a fixed amount.

The franchisee may be required to purchase specified products from the franchisor.

The franchise agreement has a fixed term generally with an option to renew with such option being
able to be exercised by the franchisee upon certain terms and conditions.
 

  • Most franchises in Australia are Business Format franchises. That is, the franchisor has specified in a number of manuals, usually called Operations Manuals, the system by which the franchisee must conduct his business.
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