Franchising is a common way of doing business in Australia. From cafés and gyms to cleaning and home services, many well-known brands operate as franchises. For business owners, franchising allows them to grow their brand faster. For franchisees, it offers a chance to run a business using an established name and proven system. Understanding how a franchise works is important before getting involved, whether you are thinking of becoming a franchisor or buying a franchise.
What Is a Franchise?
A franchise is a business arrangement where one party, known as the franchisor, gives another party, called the franchisee, the right to operate a business using their brand, systems, and support. The franchisee owns and runs their own business but must follow the rules and standards set by the franchisor. In return, the franchisor provides training, guidance, and the use of an established brand name.
In Australia, franchising is regulated by law to ensure fairness and transparency between both parties. This helps protect franchisees while also setting clear expectations for franchisors.
The Role of the Franchisor
The franchisor is the owner of the brand and the business system. Their main role is to create a successful model that can be repeated across different locations. This includes developing operating procedures, marketing strategies, and training programs.
The franchisor also provides ongoing support to franchisees. This may include initial training, marketing assistance, business advice, and updates to systems. In Australia, franchisors are required to act in good faith and comply with the Franchising Code of Conduct, which sets legal standards for how franchises must operate.
The Role of the Franchisee
The franchisee is an independent business owner who buys the right to operate under the franchisor’s brand. They invest their own money, manage staff, and handle day-to-day operations. While franchisees must follow the franchisor’s system, they are responsible for running their business successfully.
In Australia, franchisees benefit from starting with an established brand rather than building one from scratch. However, they must follow the franchise agreement and cannot operate outside the rules set by the franchisor.
Franchise Fees And Ongoing Costs
To join a franchise, a franchisee usually pays an upfront franchise fee. This fee covers the cost of joining the network, training, and access to the brand and systems. There are also ongoing fees, such as royalties and marketing contributions.
Royalties are usually paid regularly and are often a percentage of turnover. Marketing fees are used to promote the brand across Australia. These costs should be clearly explained before a franchise agreement is signed, as required by Australian law.
Legal Requirements In Australia
Franchising in Australia is governed by the Franchising Code of Conduct under the Competition and Consumer Act. Before joining a franchise, franchisees must receive a disclosure document, a franchise agreement, and a key facts sheet.
These documents explain the risks, costs, and obligations involved. They are designed to help people make informed decisions. Both franchisors and franchisees are expected to understand and follow these legal requirements.
Benefits And Challenges Of Franchising
One of the main benefits of franchising is reduced risk compared to starting a new business from scratch. Franchisees gain access to proven systems, brand recognition, and support. Franchisors benefit from faster growth without managing every location themselves.
However, franchising also comes with challenges. Franchisees have less freedom to make decisions, and franchisors must invest time and money into supporting their network. Success depends on cooperation and clear communication between both parties.
Conclusion
A franchise works through a partnership between a franchisor and a franchisee. The franchisor provides the brand, systems, and support, while the franchisee runs their own business within those guidelines. In Australia, franchising is carefully regulated to promote fairness and transparency. When both parties understand their roles and responsibilities, franchising can be a successful and rewarding business model for everyone involved.
