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Should you buy a franchise or start from scratch?

Written on the 27 September 2013


With the franchise sector in Australia worth $131 billion, it’s no surprise that franchising is a popular option for those who want to run their own business.

But is it for you, or are you better off going it alone?

The big benefit in buying a franchise is that it allows the franchisee access to all the support, systems and advertising from the already established company (franchisor), without any need for prior business experience.

This makes it perfectly suited to personalities who are comfortable taking direction from a boss and are happy to forego their own egos in order to do so.

The Franchise Council of Australia is the peak body for this sector and is the best starting point for those thinking of buying a franchise.

They say the cost of franchises varies depending on the system. Service franchises which can be operated on a mobile basis can cost from $5,000 to $50,000. Retail franchises which require a fix shopfront and shop fittings can cost between $50,000 and $250,000 or more.

A quick look at the franchises for sale shows that buying a Boost Juice bar requires initial capital investment of between $240,000 and $300,000, while a Gloria Jean’s café will set you back between $300,000 and $450,000.

The Franchise Council also provide a business directory, a list of franchises for sale, networking and events, as well as access to specialist accounting, legal and financial advice from experts.

Depending on your personality type, goals and work method, buying a pre-systemised franchise might just be the way to go, but it’s not a guarantee for success and it’s important not to let it create a false sense of security.

Billy Pech, 32, has recently bought a Moochi frozen yoghurt franchise and says that the support he receives from headquarters makes it an easier option than if he had started from scratch on his own.

“The fact that there’s a lot of resourcing, there are already contacts with suppliers, the POS system is established, the reporting, tools, marketing and recipes are all done, so it means we jump into that whole business without having to develop it ourselves.”

Pech still works in corporate sales, and having a franchise means the system is already in place so that he doesn’t have to be there 24/7.

“The biggest risk is if you go into a franchise type model, you’re effectively buying the goodwill of the franchisor. There can be a potential, but calculated risk in that you don’t know if your particular market will accept it.”

“Obviously the franchisor doesn’t want us to introduce a different menu to all the other franchises, so you’re not as nimble as if it was your own startup.”

Still, he says that the past four months have been a positive experience for him and he would definitely consider franchising again in the future.

“The reality is, it’s almost like a marriage. These guys are just as accountable as you are to making mistakes. If you’re on your own, that’s a lot of responsibility.”

Pros of buying a franchise:

- You get the benefits of an already established business model and business network

- Business experience isn’t always necessary

- It may cost less to buy a franchise than to start your own business of the same type - Because the franchise has an existing reputation and image
- Continued management assistance and ongoing training and support

- Access to national advertising and marketing

Cons of buying a franchise:

- Not the best option if you want to be your own boss and have complete autonomy
- There is little room for creativity

- A bad performance by other franchisees can affect your franchise’s operation - Ongoing fees and royalties
- Franchisors don’t always have to renew the agreement at the end of the franchise term

- There are restrictions on where you can operate, which suppliers you can use and what products you can sell

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