Why is franchising a good business option?

FAQs: January 27, 2020

Why is franchising a good business option? 7 top reasons

There are more than 1,000 franchise brands across Australia, with 90% of those brands originating right here on our shores. More than half of these franchise brands have been operating successfully for more than 10 years.

So, why is franchising a good business option? Why are more people choosing to become a franchisee rather than start up their own business?

Let’s look at the top 7 reasons why buying a franchise makes sense, as well as the possible franchise business costs. 

Why choose to franchise?

There are many advantages to buying a franchise rather than starting your own business from scratch. Here are our top 7:

Growing sector

Franchising is a huge part of the Australian business economy and continues to grow each year. A survey of franchising conducted by the Franchise Council of Australia in 2016 showed that:

  • sales revenue for the franchising sector was estimated at $146 billion
  • an estimated 79,000 franchise units were operating across Australia
  • franchises employed around 472,000 people

These figures are estimated to rise by 2020 to:

  • $160 billion in sales revenue
  • 90,500 franchise units
  • 508,000 people employed

Established brand

Joining a franchise means you’re joining an established brand that brings with it the knowledge and experience of a successful business. The hard work of building brand recognition has already been done – customers already know and trust your brand.

Training

Professional franchisors will offer extensive training before you begin. At Red Rooster, we offer a comprehensive 10-week training program that teaches you everything from how to prepare the food through to developing a franchise business strategy. All of that training means you can hit the ground running with your new franchise store. You don’t even need to have previous business experience.

Ongoing support 

When you own a franchise with a professional franchisor, you’re not left to struggle on your own. You’ll be given ongoing support to help you with day-to-day operations, franchise business development and ironing out any issues.

At Red Rooster, you have ongoing access to a Business Consultant as your first port of call. They make regular visits to your store to support you in your franchise operations. You also have access to the State Manager and support from a comprehensive Shared Services team. And, you can always talk to other Red Rooster franchisees to hear about what’s working well in their businesses. 

Shared Services team

Being part of a franchise gives you access to a Shared Services team, freeing you up to focus on running your day-to-day operation without worrying about the bigger picture tasks like marketing or negotiating prices.

The Shared Services team manages things like:

  • design and marketing 
  • technology support
  • property negotiations
  • product development
  • supply chain logistics
  • marketing

Higher success rate

More than 60% of small businesses fail in their first 3 years. In contrast, franchise businesses have a much higher success rate. This is because you’re part of a larger, established and successful organisation. There’s a proven formula to follow as well, one that’s been tried-and-tested across many sites already. All in all, operating a franchise business minimises your risk of business failure.

Own boss

As a franchisee, you have the best of both worlds. You’re your own boss, but you have the support and resources of a larger organisation. You’re provided with the systems and processes to set you up for success, while still being the master of your own domain.

While there are many advantages to becoming a franchisee, it’s a significant monetary investment so you must do due diligence before committing.

How much does a franchise business cost?

Franchise business costs will vary across franchisors. Fees can range from $5,000 up to $1 million and depend on factors like the brand, franchise model and joining requirements.

Buying a franchise business comes with several types of fees.

Entry or set-up fee

The initial startup fee can include:

  • Franchise fee for the right to use the brand
  • Business set up costs – for a Quick Service Restaurant franchise, like us, this would include costs for shop fit out, purchase of plant and equipment, buying inventory and paying lease commitments
  • Fees for legal and administrative costs
  • Training
  • Other costs such as software, hardware and support costs

Ongoing fees

You’ll also need to pay your franchisor ongoing fees as part of the franchise agreement. Some fees will be calculated as a percentage of turnover while others are set costs. These fees may include:

  • Royalty fees
  • Marketing contribution
  • Ongoing training costs
  • Equipment rental

While it might seem like a large investment, it’s important to keep in mind that the fees cover services like:

  • Value of intellectual property
  • Cost of advertising and recruitment
  • Cost of training and support
  • Location and lease research and negotiations

Red Rooster entry fees vary depending on whether you buy a new or existing site, and the size and layout of the store. Typically Red Rooster stores cost between $370,000 and $900,000 (plus GST) to establish. There is also a new franchise fee of $50,000 (plus GST) and initial training fee of $12,500 (plus GST) and administration cost of $10,000 (plus GST).

Wrapping it all up: why is franchising a good business option? 

  • You capitalise on an established, trusted and well-liked brand in a growing business sector.
  • You get to be your own boss, but with all the support of an established, knowledgeable and battle-tested business formula behind you.
  • You minimise the risk that comes with most new businesses and you’re set up to succeed right from day one.

Franchising is the way to go if you’re looking for a tried-and-tested business model from a well-loved brand.

Like to know more about becoming a Red Rooster franchisee?

Red Rooster has over 360 restaurants across suburban, regional and rural Australia. Are you interested in being our next franchisee? 

Get in touch today! 

Our Franchising Team is here to help: