Newspaper article Daily Examiner (Grafton, Australia)

Franchises Are a Popular Option

Newspaper article Daily Examiner (Grafton, Australia)

Franchises Are a Popular Option

Article excerpt

Byline: MAKING MONEY By PAUL CLITHEROE

AS WE head toward the holiday season, many Australian workers are planning their annual leave. It can be a time when our thoughts turn to saying goodbye to the boss for good and taking up the option of self-employment. Buying into a franchise is a popular alternative to starting a business from scratch but it's not a guaranteed path to prosperity.

Australia's franchise sector turns over annual sales of around $128 billion and investors have a choice of more than 1000 different franchise options from fast-food outlets to pet grooming, juice bars and real estate.

There is an equally wide range of costs involved. The purchase price of a franchise can vary from a low of around $5000 to in excess of $1 million. The higher the profile of the franchise and the greater its commercial success the higher the price tag. In addition, some franchises like McDonald's require a significant investment in capital equipment, which adds to the cost.

Apart from the upfront cost of buying a franchise, the afranchiseea (the person buying into the business) can expect to pay ongoing royalties and service fees to the franchisor (the parent company). These vary from about 1% to 35% of your gross revenue. Other costs can relate to the mandatory purchases of company supplies including accounting systems, uniforms, signage and ongoing supplies.

In exchange for your money, franchisees gain the (hopefully) proven business formula and established brand name of the franchisor, as well as co-operative marketing, bulk buying and training and assistance from head office. Capable franchisors may also save a failing franchisee by arranging a sale of the business or buying it themselves to avoid damage to the public image of the business. …

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